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  CSPAN    U.S. Senate    News/Business.  

    January 15, 2013
    9:00 - 12:00pm EST  

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we can do a much better job in terms of keeping these magazine clips with high-capacity out of the hands of folks who shouldn't have them, and a assault weapons ban that is meaningful, that those are things i continue to believe make sense. will all of them get through this congress? i don't know. but what's uppermost in my mind is making sure that i'm honest with the american people and with members of congress about what i think will work, what i think is something that will make a difference, and repeat what i said earlier, if there is a step we can take that will save even one child from what happened in newtown, we should take that step. >> we expect to hear more about the vice president's recommendations at today's white house briefing with press secretary jay carney. that is scheduled for 12:30 p.m.
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eastern and we'll have that live on c-span3. and very quickly on c-span2 this afternoon to bring you more from the summit on reducing gun violence taking place at johns hopkins university. we had they won yesterday. coverage begins at 4 p.m. eastern here on c-span2. >> [inaudible conversations] >> live pictures once again from the brookings institution here in washington where they're holding a forum on jobs, innovation and the economy. >> it's my pleasure to welcome you here to the brookings institution on a soggy day. it's not too hard to come in from outside on a day like this. this is the fifth growth through innovation forum that we have held at brookings but i'll give you a little background in a minute.
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it's the third one that we are conducting publicly. the phrase growth through innovation is an important part of the vocabulary to at brookings. we have what we call for institutional priorities under which we try to cluster all of the work that are more than 100 scholars do here. those for priorities are energy and climate, opportunity and well being, managing global change, and growth through innovation. this is i think exactly the right moment to be having today's event. we are in a period of transition in our national leadership here in the capital, of course. we have a new treasury secretary, chief of staff coming in. we'll be having a new commerce secretary, labor secretary, and, of course, the 113th congress is settling in on capitol hill. the forum is going to address the issues of how to
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reinvigorate our economy, how to strengthen competitiveness, and how to create jobs. we're going to have three panels. the first on advancing industry and manufacturing. the second on deficit reform, and the third on improving government performance. the participants here today include brookings scholars, outside experts, and private sector representatives and leaders. our discussions will reflect a lot of the research that goes on here at brookings, and you will be able to find a number of examples of that research outside the auditorium where you came in. my recommended particular, the work of our metropolitan program on ideas on how to revitalize manufacturing, and also the work of art government studies program on how to make innovation-based economy.
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the growth through innovation project is an example of what we're doing increasingly here at brookings, and that is undertaking both research and public events and outreach that draw from multiple programs of research pro-guns here at the institution. and we have three of our research programs represented here today. the growth through innovation project is led inside a brookings by darrell west of our government studies program, bruce katz, of our metropolitan program of our economics studies program. the co-chairs of gti as the color, growth through innovation, our three brookings trustees, glenn hutchins, klaus kleinfeld and dominic barton. my final note before turning the program over to glenn is to do something quite different than it did for many years, and it shows that has been technological innovation. we live in a new era.
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i used to always in my remarks by saying will everybody please turn off their cell phones. i would ask you to turn them on to silence, you can keep them on, on the condition that you use them only to tweet, out of this conference. and for those of you who are able to do that, i'm not yet one of them, the hash tag is #usinnovation. so glenn, you know all that so come on up here and talk to these folks. >> i'm sure and acts of widespread civil disagree with you will do with your technology what you choose. and as someone in the technology business, please go ahead because i like to make money while i'm talking. i'd like to thank you, stroke, for having me here today, welcoming all of us to the brookings for the welcome to all of you. we've got a stellar group of
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panel organized today with fantastic panels. i will get to my remarks are equipped because i know you come to hear them, not me. i did want to reflect our first growth through innovation panel was over three years ago. a time we really in the depth of the great recession. the unemployment rate was 10%. we lost 8.5 million jobs, worth pausing remembering that. a lot of us were very, it was a moment of great national crisis. brookings i think under struggles leadership chose to point and lead the way for institution. how do we solve, how do we grapple with than today's problems in order to create a brighter future? one of things we did is what you hear to what has come to be part of today, the growth through innovation for them. we decided we would examine government policies that would help to unleash private sector innovation. we were not under any illusions that government creates jobs or innovations that can create the conditions under which those can be fostered.
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and, because we do with the need for growth on the heels of the great recession as a vital american problem, a huge loss of economic production with operating about $1 trillion below our potential. at excessively high unemployment rate, which -- many people ask why is growth so important, why should we focus on more washington centric kind of problems? and is really kind of a math problem. people don't understand the vital difference of compounding of interest over the course of very long time periods, economic growth. 1% difference in economic growth of two to 3% represents a massive, massive outcome difference over time. a few examples for you. if, for instance, between the period between the end of the civil war in 1990, the u.s. economy had grown 1% less, our economy would've been the same size in 1990 as a that of mexi
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mexico. that 1% difference over that century created massive outcome difference. looking forward 10 years from now, if we go out 2% rather than 3% potential we will have have had $1 trillion worth of outcome which is about 10 -- in this economy. that's a very, very big deal. the growth alone is also not important. it's also growth that is inclusive. that is broadly shared and that's one of the things that brookings is devoted to the we have a project called the hamilton project wizard -- which is focused o on the issue. if over the course of the last 30 years, roughly 35 years, the average income in the united states house hold have grown at the same rate of you succumb, 26% for the household growth, 2% of economy, the per capita gdp would be 50% higher than it is today, $90,000 versus $16,000.
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if you translate that into can what happens in household economy that is final. and what we do in washington is really, really important i just came back from a trip to brazil but i don't want to spend a lot of time on that but brazil is essentially has gone to a 0% grossly. a lot of that has to do with the kinds of things we have experience in washington that has been imposed in brazil. economic uncertainty. sorry, fiscal uncertainty, slightly higher taxes, slightly more because, slightly more costlier and all of that is caused the economy to government economic -- we have an ability to withstand more that independent than they do, but it's with the same effect. government can't necessary great economic growth but it can create the conditions for which the economies grow. we need understand that's vitally important. so today, look where we are, and you can see that the economy has been in recovery. household net worth has recovered almost pre-recession
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levels. the economy is almost pre-recession levels. we've added 4.5 million jobs, that still means we afford to go to get back to pre-recession. unemployment rate has dropped to 718%. not enough. housing sector is recovering, we are in the process of a slow steady recovery. the problem is that at about 2% is probably not enough to reduce unemployment measurably from there measurably from your and giving up of 2% is a vital. so that's what we're going to talk about today. i'm very, very hopeful we can do that. we are creating conditions right now to increase economic growth in the private sector. today, however, that the problem is the political failure in this town. associate with the inability to solve our government debt problem. and now what our government that is not from today, it's over the course -- not that long time. no, decade, to levels that will further imperil our economic
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growth. we get to levels of debt as projected based on today's operating of the government, history shows those countries that have experience the level of debt grow another 1% less than they would have otherwise. so you can see -- the way to think about it, we are on the cusp of having an economy that could do to be the above 2% growth necessary to generate production and unemployed. but a debt problem that can take that growth away and get us back to the sub 2% growth that will cause unemployment that will be sticky for very long but of time. that is a very, very big problem. it's a problem that we need passionate and that doesn't include the damage to consumer confidence, the decisions that are taken as a result of the serving in corporate boardrooms, capital spent on all those sorts of things that layer on top of the. so that is a very, very big problem that we will next turn to focus on, the resources of
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growth through innovation in in coming years. but as we move to the panel today, one of the things that bruce katz has taught me is that while national governments can build up deficits and wallow in dysfunction, states and cities cannot. and that the hope, i think brandeis said, the hope that we have for important parts of her future is people of the state and local level do what's necessary where the rubber meets the road to great conditions for economic growth, innovation, and projects like advanced manufacturing, and considering the types of jobs to get the median incomes up and generate the kind of growth which is surely in close. so today we're great panel. managed by bruce. the title of the panel is proven strategies for bolstering advanced industries. is, it's all yours. take it away. [applause]
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>> good morning, everyone. and thank you all for coming out on a rainy day, and hello to everyone watching on the webcast and ultimately c-span. i'm bruce katz, vice president of the brookings institution, director of metropolitan policy program. i want to reiterate strobes reminder to tweak, under the hash tag #usinnovation. and i just want to thank glenn for the support and the intellectual guidance for growth through innovation through these years. for those of you have not picked
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up three metropolitan policy program papers on advanced manufacture or link to them on the web, please do so. we will describe those as we go forward with this thing. let me start just by quickly introducing the panel. then i will get into the conversation. might immediate left, klaus kleinfeld co-ceo of alcoa. well known to everyone in this room. also a trustee of the brookings institution. dominic barton, global managing director of mckinsey. also a trustee of the brookings institution, and someone that we been partnering with at the metropolitan policy program on moving advanced industry initiatives in colorado and tennessee. emily derocco runs her own firm called e3 which is linking economic development and skills training and workforce. the party that she was at the manufacturing institute. prior to that she played senior role in the department of labor.
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and, finally, the mayor of the great city of louisville, greg fischer, who actually has a background in manufacturing. it's very interestingly upon taking office has been working with the mayor of lexington, kentucky, on a dual metro effort, a regional effort on advanced manufacturing. let me just set some context of the papers we put out yesterday, and for the conversation today. first, a very quick reality check. we still think about manufacturing in the united states as yesterdays economy. as opposed to the vanguard of innovation in our economy. 9% of the jobs, 11% of the gdp, 35% of our engineers and 68% of private sector r&d, 90% of our patents. we may be the only mature a company to somehow decouple
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production in innovation. trust me, the germans are not doing it. the japanese are not doing it, and the chinese are not doing it. some bad news. glenn talked about the great recession. a loss of 8.5 million jobs. manufacturing lead the loss, 2.3 million manufacturing jobs lost during the recession, more than construction, more than business and professional services, more than trade and transportation. think about the great recession, the housing recession, recession of the finance sector. manufacturing took the brunt of it. and the last decade we lost 6 million manufacturing jobs in the united states. and once you lose those jobs, trust me, engineering, product development, technology skills, they leave the country. third point is some good news, right? since the end of the recession, manufacturing has gained back
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about 526,000 jobs, not enough to make up the loss, but some significant change. and there are trends out there right now, the rise of wages in china, the shale gas revolution, the beginning of we showing a production facilities, some disruptive technologies and 3-d imaging, digital fabrication, that gives us the sense that this is not a flip at the beginning of something big. so here's the question that we have for ourselves, for the country. these are essentially the topic of yesterday's papers that i think will be the topic of some of our conversation today. how do we begin to drive collaboration between our major companies, our universities, through a series of specialized terms, through which we can crack the code on products and profit innovation? right. as they do in germany. so we have recommended a series of advanced industry hubs. not very expensive, modest
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beginnings of the department of commerce and department of energy. how do we build the supply of skilled workers? yesterday we recommended a race to the shop. remember race to the top? raced to the shop. i fail to shop. i failed shot but i know there's quite a few people out there who make things. how do we have a race to the shop so we can challenge states and cities to orient their skilled workers to their distinctive manufacturing clusters, ma whether it's automated and label in detroit, whether it's aerospace in wichita and seattle, whether it's computer and electronic products in san jose. and then lastly is how do we grow a supply of advanced engineers in the united states by greeting and network of manufacturing universities? we've done it with land grant starting in the 1860s. this is the challenge of this generation this century, this year. that's our final recommendation. so, we can get our act together in this country, and from our
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perspective at the metro program, because we see all this energy bubbling up in cities and metros and states. we can realize the full potential that advanced manufacturing moment, but we do need to make some -- we do need of some smart public policy, whether in this town, or in the laboratories of democracy and centers of innovation, our states, cities and metropolitan areas. so with that concept setting, let me start with clous klaus. what is fueling it and what's been holding back? >> i do think, to the very fact that we're sitting here and debating it, the whole fact that you gave us show the debate is in full swing, and it's good that it is in full swing because there's so many factors change. let's get a lay of the lane. i think you mentioned a couple of things in there. i'd like to add a few there. first, -- [inaudible] 500,000,
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ma that's good, right? secondly, i mean, basically you see automotive industry is a large player in the manufacture who would've thought, after the disaster we saw in 2008-2009, the projections for this year is we might be go back to pre-recession levels. it's a strong engine, a strong engine for growth. and, finally, it's become innovative. the second part, why is that so? there's a big change because some smart government regulation. we see it directly affecting us. basically, final we decided to take the cars that we have here, have to of pages certain efficiency rules. that drives suddenly a whole host of innovation thought, light weight comes into the game. so that's a new condition, smart legislation. in addition to smart legislation as a new foundation, you mentioned that, but a second one is changing exercise.
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where the u.s. has been given some gift i would say, it has some implications that we're just starting to understand what that means, right? because we're suddenly seeing already happening today, a decoupling between natural gas and oil happening here. what used to be very high, it is decouple and it's cheap. it is going to be cheap for a very long time if we don't screw it up, which i don't think we will. so this is a fantastic opportunity for many, many industry. and that alone i will give you three examples out of the alcoa area. we are putting 300 million investment, to build an automotive expansion and the interesting thing is we are already thinking about part two of the expansion. we are building another part of the expansion of our alcoa capacity to be developed for the aerospace industries and we're putting that -- [inaudible]. aerospace by the way, another
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fantastic industry where the u.s. continues to a favorite strong position, and it's a nice markham has a lot of manufacturing implications. and a place that we used to treat as a swing plan which is down in texas is a big refinery, the only refinery we have in the u.s. energy costs and yes were outrageously high. this is now one of our -- we are bringing back to play a full load, play a full load world. so that's all the good things that's happening, right. but then what is the risk or opportunity must if you look at the numbers, in the next years, through 2018, 2.7 million manufacturing jobs, people will retire. so we have, we have, you can see, i see it as an opportunity and shovel a lot of people that are leaving the work force. at the same time, currently with about 300,000 jobs open in a
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manufacturing, in the u.s. alo alone. and then the question, what is the new job going to look like? pretty much everybody projects and i would agree with that, that about 40% is even more of those jobs in the future are in manufacturing will require a full education. so that gets us how do we deal with educational site. i do want to go into that. then you come to the question of how do you come how do we make a more effective and priority. i don't know how it happened, but we stuck with the history stuck with a history in a is that was very excellent education. and we. and were regarded as everybody basically is back to the ford model. you have kindergarten through 12, then you go to college, and if you haven't achieved that you are really worthless, right? so that's not working. i think we have to go back to origin and say let's make it more flexible and let's also bring -- you asked early on where is opportunity. i think that is the most natural
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opportunity for cooperation to, in fact, it's happening already. we have a number of programs on the way they successfully. there's a big challenge there, and that is a challenge that most people today that goes when education system don't even understand what a manufacturing job looks like. the image that they have been manufactured you is you come in early in the month with a white shirt and you leave an evening with a dirty shirt, right? so that so far from reality, and your fingernails look pretty. so that so far from the reality today, that we've got to make manufacturing sexy again. i think it starts with bringing people into our plans, make having them look at what's really going on, how high-tech these things are so young people get -- there's a couple things what we're doing now spent just one quick thing. i detect a slight a german accent here.
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[laughter] >> just two seconds on the german model of apprenticeship, if you can. and then move on. >> the apprenticeship, the model goes like this but you basically, society accepted for as long as i can think, that a manufacturing job has a high esteem of society. i think that's what it starts with. and the education, the vocation education and the trainers are seen with an equally strong social respect, right? that's really important. so there's not a stigma. in fact, there's a counter statement. if you have the kit that ties to the h.r. 14 or so, instead of going into 12, you know, is to go to leave after ninth grade,
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and then go into a vocational training job. the way this works, you work most of the time, i mean, during the year and then, then you have courses, educational schools. these courses are practically related to the job that you get educated in. and then at the end you have a national media to recognize the test. so if you pass this test, you know, no matter where you want to go, you have a degree. this degree i would say very, very highly regarded. the big advantage it has, and i've seen that in families and friends, i don't know how it is with your kids, there are kids, obviously that don't have that much of temptation to learn math. and particularly when they get into the age of 13 to 15 or so but because suddenly sweep up
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and have other interests, and math is not the most effective thing to learn in the afternoon. the dynamic changed, and the regrettably -- that's a sad thing. the dynamic changed tremendously, when you tell that kid that the car that you just got from the junkyard decade to get inside, do whatever call your, repaired and you can pick up some good looking girl, but to tune that motor and all you need to know how to handle a computer. because these days, i may, tuning a motor, you have to understand how to think and how to wire certain things. if you understand that you need to understand the final functi function. and that's where math comes in. i tell you, this kid is going to learn that type of map because that means something very different to that individual and what it would've meant if you have taught that in a classroom
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environment with just a discussion. >> that's very important dynamics. >> so game changer, shale gas, regulation, barriers, culture, skill but i will talk about the hormones. dominant, mckinsey issue is sort of the cutting edge of looking at not only global manufacturing trends, but also trains but also trains in which are described as advanced industry. and this interesting interplay of production innovation. how do you see the landscape? >> very much with what you said at the beginning, the context of what transit is a, i think it is a shift going on. i think maybe we should start by saying too many of us, love manufacturing into one big category. there are at least five categories. i won't bore you with our views. i think the tip of it is advanced manufacturing, which is more using the data advanced materials, its nanotechnology. it's the combination of many
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other things, the innovation, the capabilities that this country is superbly good, the cross-cultural capability and as you said, it only is roughly around 11-12% of gdp, but it's extremely important flywheel. it accounts for, we think of a third of u.s. productivity growth. so that small, that 12% of gdp is accounting for a third of our productivity. go back to what glenn said at the beginning, the difference of 1% shift. this is a very big deal for us to be able to get right. the other thing i would say is that this advanced manufacturing sector has i've been doing quite well, very well before the great recession, about 2.6% growth. it has continued to do that in spite of all the challenges and changes that's going on. we think is an opportunity for it to grow at a much more significant way.
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this is where, you know, doing actual work with brookings, colorado, the work that you've been in tennessee, the work that is being done in cities in colorado with the space program, areas where i think we should really advance advanced industries is by doing some of things the country does very well. if you look at the silicon valley come to look at what's happening in austin, texas. you look at what's happened in cambridge. everyone else in the world try to replicate these but it's are difficult to do. i could reel off a lot of -- rush is trying to do. malaysia try to do. china is trying to do. there's something that we have, and it's and, i don't know, if it's in the air or i don't know what it is but it's a collaboration. i think if you look at what's happening in colorado with facebook and 370 companies, they are not all in one sector. they are multiple sectors. health care companies can learn a lot from space of manufacturing countries. the video technology that is being used, to interface, in the
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space program is very applicable to, if you're a young doctor doing diagnostics and so forth, medical device companies, you want to be together. and the role government can play, especially state governors and mayors i think played a really important role in getting these clusters together. and i think we see huge potential. the last thing i want to say is where there's momentum, we lost a lot of jobs. we lost a lot of jobs in the private sector manufacturing. we are seeing more reassuring. i could bore you with quite a long list of companies that has been coming back to the u.s., particularly on the advanced. just rattle off a few, ge with her geo springs water heater. coming to kentucky. for the first time during one of their luxury vehicles, the infiniti suv in tennessee. apple is bringing some of the
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mact production line back here. emerson is bringing from asia to much. also part of it is the shale gas. labor costs is only about, three to 4% of the cost to walk about energy cost coming down the way have. just in the last six years, natural gas prices drop by what, 67%. that is a far bigger driver. and by the way, wage costs are going up. so we've got some momentum. emerson, bmw, electrolux, building, sounds like a strange thing to put in -- a cooking center. but there's a hell of a lot of technology in cooking that oxley goes on, again with data, the various different materials spent you are not talking about my household. [laughter] >> even whammo, the guys who make frisbees and hoola hoop, they brought back that.
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so there's more technology, believe it or not going into the plate items and so forth. so there's actually a lot going on but i think what we need to do is sort of take the competitive advantage we have around collaboration and skillet and i think that will create more business opportunities, and is going to great his productivity effect, flywheel effect spent it strikes me what you're describing is an economy that we just don't quite understand. i'm looking at choose assistance yesterday. silicon valley, san jose, remember 9% of americans are employed in manufacturing to 17% in san jose. we tend to think of it as they spoke, social media. big manufacturing powerhouse. then you look at portland, i don't know what people think of portland, oregon, but it's a sustainable metropolis of the world. 20% of the product is in production compared to 12% for
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the country as a whole but it sounds like we don't understand our own economy. >> going a bit off of what klaus was saying, about making manufacturing sexy. machinists, right? we should be celebrating the hell out of our machinists union, idle, 110,000 the i word about the aging of that group. you think about what's being done in aerospace and the capabilities, the training we need. these are superstars but you think of machinists again, i love your white shirt -- these people are highly skilled technology. the other i would say is accurate. if you go to brazil right now, you look at the farming going on, a technology record, they are growing. the farms are so big, there's no roads. so that's the big export source for -- every industry needs advanced manufacturing to again, i think we need to somehow get
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to see this that this is a very prestigious role to be played, and a lot of opportunity and so forth. >> [inaudible] >> we are reaching points one ago to our aerospace, we are number one in aerospace manufacturing. we are reaching levels that are impossible to reach through manual work. unique, i mean, you need to find this technology and computers to do, and that's what the machinists do. so the person they see operate a number of controls, machines, that's a good vantage of bringing jobs back because, but it is fewer jobs and very, very different skills spent how do you think about the cultural barriers, the continue statement, and some very big numbers that klaus is putting out there about the kind of skilled workforce that we need
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to build, and we could rattle off numbers about educational efficiency and the fact that we're not really investing sufficiently in standard how do we overcome that? >> well, it warms my heart to i do revered machinists, and spent most of my career helping to find things that were. not only for our manufacturing employers, but for workers that, quite frankly, are very attuned to the skills needed in the manufacturing economy. i would venture to say and agreement with both our prior panelists that it is manufacturing that we don't understand today. that does require a cultural shift. but in terms of our education workforce system, approach to supporting the growth and sustainability of manufacturing in the u.s., we actually do know what works. and we are just not doing it everywhere, in all cases.
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there isn't a manufacturing discussion that occurs in this country, i think globally, was the development of talent doesn't become a huge priority for all of us to address. and i'm really pleased about this. quite frankly, with the u.s. falling behind in educational attainment and in its understanding of and promotion of what you and i might call vocational education, nowhere is reform used more than in support of our u.s. manufacturing capacity. so first, i do want to thank brookings for the race to the shop. it points to many of the shortcomings that we need to address, even if there is not such a race. but the cultural an image issues that klaus raised, actually i guess i would have to announce it would probably need to change
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the shop title. because manufacturing is so very, very different today. thank you for that ticker. so what do we know about what works? i think in large measure these points are represented on this panel today. number one, we know that our focus in developing an educated skilled workforce in manufacturing needs to be within the regional economy. not against political jurisdictions where all of our policy systems and investments from the federal government now reside. it is in these regional economies where clusters are developing, and manufacturing can become the anchor, or is now the anchor, where we can really stabilize and grow this current industries. and i think even more importantly, create a talent asset that in many instances is number one asset to attract new manufacturers who are either we sure and in bringing jobs back,
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and/or moving from new technologies and innovation to production capacity with a regional economy. so by the policies and investment and workforce is absolutely critical to supporting a regional economies that will be the anchors of our manufacturing growth. number two, and that is going to say he's in a very different way, because these two gentlemen actually touched some really important points. we need much better defining information about the jobs occupation and skills in manufacturing today. it's just a travesty, quite frankly, what we were growth. and aren't national database, many jobs, careers, occupation and advanced manufacturing today are not even in the. they are not -- they become service jobs in national databases that try policies and investments. and we just can't rely on,
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forgiving, bureau of labor statistics retrospective data about what kinds of jobs and careers are in manufacturing today. we need the power of the national database, but fueled by the transactional real-time data coming from organizations like manpower, for example, coupled again with industry driven input to the kinds of jobs and skilled companies require, create and need today and into the future in manufacturing. this is a big data test. that is going to impact education and -- >> [inaudible] >> exactly. we just had that conversation yesterday. and as we gain better knowledge about those jobs and careers, then we need -- i hesitate to use this work, but we need that campaign. people today still look to the parents as the major influencer
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in what educational pathways and careers they're going to pursue. and our parents today don't have a clue what the opportunities in manufacturing are. most of them will say we don't manufacture anything anymore, and they will not decide that there are exciting field of robotics. and high-end machine and high-end applications, welding, materials, that they will define those jobs into a young person's future. neither will educators. so an information campaign based on the real jobs and career opportunities with real payout because manufacturing continues to be the highest paid wage and benefits by industry broadly nationally than any other sect sector. the other big ticket item which we have to success of government into manufacturing, but not completely, not comprehensively in the u.s., we're at the front end of this.
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it is outlook will enter education and workforce development reform efforts quite frankly and other sectors as well, really gets to addressing your question about the apprenticeship model. we can't replicate nor should we replicate that model exactly in the u.s. but what we do need to do is, our federal policies and investments have created between educational pathways and workforce development. that's absolutely bizarre. we can and have built integrated educational pathways and secondary through post secondary education, that allow for alternative path to graduation and the pursuit of post secondary skills development and credentials, that, in fact, relate to cq% of jobs in our economic that requires a secondary education, but not necessarily a baccalaureate or
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graduate degree. so in manufacturing, while i was with the institute, we developed a system of nationally portable industry recognized credentials in machining, welding, manufacturing logistics processes built on a foundation, and academic foundation of applied math and reading. translated that to the credentials, we could, and the curriculum, we could and, in fact, were integrated into secondary and community college programs of study. leading stackable credentials with real market out, along the way to an associate or baccalaureate degree. and is a system to our engineering graduates. progressive companies like alcoa. i hope you knew this, klaus, supported the integration of those certification in the community colleges within their
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footprint, moving to the pipeline of workers, skilled workers that they still need today and into the future. when i left the institute we were active in 36 states. that's in a four-year period. it shows you we can reform the education system by integrating from the needs of employers. very quickly, the other things we know that work that we need more investment in manufacturi manufacturing, more business driven partnerships with higher education. we need the clinical experience opportunities in health care as part of your learning. in manufacturing and internships are an important part of this. we actually posted this in the right skills initiative in the minneapolis area. you can get -- i workers with credentials that are valued by manufacturers, coupled with a paid internship which is so
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helpful to working learners today. .. >> this has huge impact federally and in our new federalism definition because many of the entitlement or benefit programs that are going to be the subject of great debate -- enter right. >> -- are actually the intake operations for a work force system that leads to employment if we do this right. every unemployed worker in the ui system, every tan of person
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in use development programs, if we can link them early with the right information to a pathway that leads to a credential and doesn't cost $60,000 a year for a baccalaureate degree but instead is a right skills now for skills that lead to employment and a good salary, we're going to be able to address in a very positive way the entitlement reform efforts as well. >> thanks. i think that's just a great recitation of the fact that we know what to do. >> know what to do. >> so now we get to the person who's actually in charge. [laughter] you know? he ran to be mayor of louisville, it's the 16th largest city in the united states. no one told him that in our new federalism the whole pyramid has been flipped. you're in charge. you're pragmatic, you're affirmative, you're nonpartisan, you get stuff done, and then you come to washington and -- [laughter] describe what you're doing in louisville with lexington, with your business community, with
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your university community, with your skills and education system. because i think it really is a model being built for the country. >> thank you. so i happen to be a business guy, an entrepreneur that's mayor right now. so i speak more as a business person and cofounder of a manufacturing company in 980 -- 1980, and we grew it into a nice international manufacturing firm, so i've been able to see it from both sides and see this interesting transition as well. so we've talked a lot this morning about the hard skills, the credentials that are involved. but universeally, whether it's an assembly line worker on engineer, there's as much emphasis on the soft skills no matter where you are. and by soft skills i mean just the ability on one side to show up regularly. two, are you a problem solver? three, are you a team player? can you lead, can you follow? and it's these type of skills that i really see in high performance companies that have higher productivity than their competitors. because the teams know how to
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get together, identify the problems whether they're big innovation problems or just small lien problems they need to work through, and they can innovate more rapidly than their competitors. so these are skills we can teach, you know, starting in grade school and high school, basic things like data collection and analysis and how to be members of a team. i don't want us to forget while we go through this technical stuff that at the end it's people working together, and it's the teams that are really getting things done. we have two great multi-nationals in louisville that kind of define our manufacturing base, and that's ford motor company with two plants. one manufactures the escape, the other is the kentucky truck plant. and then general electric appliances as well. so those are large employers. they invested over a billion dollars two years ago in the modernization of their plants as in ge's case reshoring business, two product lines from business, one from china. after being out of intensely
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u.s.-dedicated manufacturing for 10 or 15 years. and so they realize it's better to have the whole supply chain closerrer together, and particularly to have r&d closer together. bring back the products to america and now they're in the process of saying what did we lose in that 10 or 15-year period. as has been mentioned up here, a lot of the manufacturing work force is aging. one of the rock star positions in the manufacturing plant would be an industrial maintenance technician. these guys, and they're usually guys, they can fix anything, you know? whether it's a hammer or a computer, they can fix anything. very highly skilled and absolutely to keep manufacturing plants running. this was lost a little bit when america offshored manufacturing. and so those skills are absolutely acquired kind of meat and potatoes of keeping factories running. so that aging work force is a challenge as well because we've talked about how manufacturing
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does not have the cultural attraction that it should be and that we need to get it back so that that young hot shot in high school saying i want to be an industrial technician, that's a really cool career path. i can make $80-$100,000 a year, make a good living off that as well. so we're in transition of that. so solution wise we start with some high schools, magnet programs around manufacturing. our junior and technical college, obviously, have everything from a certificate to full degrees that can be focused on manufacturing as well. and i want to emphasize emily talked about these stack bl credentials that are out there already but are not being taken advantage of by manufacturing in the u.s. to the degree that they should. and i don't know if it's because people want to have we didn't invent it at our company so we can't use it syndrome, but these credentials are a fantastic way to prescreen when you're hiring people. and there are a lot of people that want jobs. when ge was hiring a thousand
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new people, 12,000 people showed up for those jobs. now, of those 12,000 probably about a quarter of them were eligible, were qualified for the jobs which is a whole other commentary about this lost massive wave of tens of millions of people that we have that don't have the skills in our country right now to compete in a global society. so the stackable credentials, i think, are something we really need to focus on. that leads to another area that i think as a country we need to figure out, because we're trying to figure it out independently locally. and that is, what is the power of a work force intermediary in today's world that has so much more data, we're calling it big data right now. we can go out in louisville and scrape all the job databases and come back with precision and say there's 800 sales opening this week in the community, 400 coder openings, there's 600 nursing assistant openings. we didn't have that capability just a couple years ago. so what does that mean then for
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the universities, the technical colleges? are they nimble enough to respond to the needs of this work force that's changing ever faster and is rapidly change -- in this rapidly-changing world that we're living in? so that's a really interesting process we're in the middle of right now. and as i talk to my colleagues at the u.s. conference of mayors, this is a national problem. so we really haven't figured out how quite to do this yet. but it does require business partnership, and i'll be frank, as a business guy that now just happens to be mayor, businesses are busy, you know? [laughter] and if government can't respond efficiently and quickly in a way where they've got their act together, guess what? we've just got to move on and do our own things. so we talk about how government can enable -- and there is absolutely a critical role there, but it has to move at the speed of business for it to be relevant. and unfortunately for bureaucracies, the speed of business and the speed of the world is ever faster right now. so how do we catch up and break through all of that?
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and last point, we just talked about the culture. number one is embracing the fact that if we want to compete at a manufacturing level, global levels of quality, productivity, safety must be givens. then how do we get that done with this global wage structure that's out there and result in good middle class jobs for american citizens? >> right. >> this is something i'm very concerned about. when we see kind of erosion of the middle class over the last decade or two, it parallels pretty closely with the erosion of manufacturing in the country as well. but what's changed since the offshoring is this global wage sector. so how do we bring the manufacturing jobs back that result in middle class american wages? >> right. >> because one of the reasons why manufacturing is growing back in america is the two-tier wage system where the jobs before used to be $20-$30 an hour, now they're $15 an hour
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jobs. so to cut two-income families. this is a big issue for the country because we have to have a healthy middle class, and we've got to figure that out while we have this manufacturing renaissance in the country. >> so just try to summarize what i'm hearing here, and then we can open up to some questions. if i had a ledger, this is the positive side which i still don't think is completely understood in this town for sure, but even throughout the country you've got some of the smart rules, right, that are coming out of the federal government, frankly, around auto or some other sectors that are fueling innovation, so to speak, right? we've got the best network of advanced research institutions in the world. we still have to work on commercialization of innovation, but that's -- we can crack that code. we've got the natural gas gift, right? and the move towards energy independence. we seem to know what works on
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skills that we haven't quite scaled it up yet. we do have some smart proposals, i think, coming out of the obama administration that would sort of move this along. on the other side of the ledger, culture, right? which, you know, when you look at popular media, you still basically see the repetition of the old stigma. um, and i would put on the other side of the ledger some of these really worrisome issues about some of the wage trends. so in theory what you'd want is you'd want a national campaign here, right? i mean, you'd really want the federal government to basically seize the moment, carpe diem, let's move ahead. if we don't have that, how do people perceive the next three or five years? let's say we get seven states, ten states, we get dozens of mayors and county leaders to do what matters with their business leaders, with their university leaders, with the skills.
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can we have a true renaissance lacking of center? i mean, how do you think this plays out? >> >> i absolutely think so because, look, the action is at the local level. >> right. >> you know, people aren't waiting around for washington, d.c. to figure things out. >> right. >> i could try to sneak into town and get out of here as fast as i can. [laughter] the other thing in that plus and minus is to talk about regional i feel. >> right. >> in our case louisville, the number one city in kentucky, about million and a half metro population, we teamed up with lexington. they're about an hour away from us, it's our number two city, about two and a half million people. we said let's figure out how to make more pie together rather than steal from each other. our universities are collaborating, big companies are collaborating with each other, so we can figure out on a regional scale 40 how do we improve work force readiness. what's the innovation cluster we need, how can we increase our exports? so there's so much work to be
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done at the local level, there's a lot of work to be done, and i think regionalism between the cities is a big part of that. >> right. >> i'd make three points. one, national campaign, yeah. but i'm with the may or your, it's not as much about what is said from washington as what we free up the regional economic leaders to do. so that gets to -- we don't seem to be able to positively legislate these days. can we just get waiver authority to waive the restrictions that we have imposed on our regional economic leaders and, quite frankly, on our governors and give them an opportunity to respond as they will, because it is their constituents who need those jobs, and that's primarily how they're elected. so they're going to want to attract businesses there. and then the last point is what the federal, um, government should focus on is the underlying business climate for
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manufacturers. i'd be remiss if i didn't say representing manufacturers for five years that the corporate tax rate and the cost, sometimes unknown cost at the times their their -- they're passed still need to be dealt with. again, freeing up those governors and mayors to create the best business climate possible for manufacturing jobs. and finally, there's always one more, isn't there? i think we have a huge failing in our education system. >> uh-huh. >> yes, it is world class, but the land grant colleges and universities have lost sight of their morrell act vision. they're still operating on the original one, and it's all about how they can change. our k-12 system is producing graduates where one of our primary manufacturers in the u.s. told me just a year ago 54% of the people who walk in his door can't read the employment application to fill it out. so hard skills aside, our basic
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academic foundation is flownlderring. we've got to address those, and there's a role for the federal government otherwise let's waive what we can and -- >> right, got it. >> -- let those state and locals take it. >> yeah. i'm a big fan of the american philosopher michael jackson -- [laughter] who once said if you want to have change, look at the man in the mirror, right? >> yeah. >> i was thinking of another song. [laughter] >> so because there's a lot of good stuff happening, and if you don't put your money where your mouth is and the word's going to spread. i mean, give you a few examples. this summer i went over to white hall, michigan, right? we have a big facility there. and here i run into this group of young girls, you know? it's summertime, they are on vacation, so i'm asking what are they doing here? they're working there, doing something. they say, oh, we have a program with the local school where we select the best young women, you know, and we give them an opportunity for two weeks to do kind of a guided internship, you
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know? and then i say, oh, that's interesting. so why are you doing that? because they have no idea what's going on here. they only see the hall from the outside, have no idea what's going on. then the lady who runs the program tells me, you know what? you wouldn't believe how many of these girls because we track them then decide -- i think this is the ninth grade -- then they decide to learn more about math. and they go into a s.t.e.m. path in the college, you know? it's those deciding moments, those deciding moments, you know? so that's one thing, you know? we have programs locally here in the u.s. around -- and many, many places -- where we cooperate with the community colleges and help them build, help them build their respect i have curriculum -- respective curriculum in a way that it comes with the opportunity if you do that, you get a job, you know? and we offer it to our own employees as an upgrade, and we pay for it, and we give them the time, you know? there's thousands of things. i encourage everyone who runs our facilities to do a family day a year.
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and the reason why i think so much of the reason is because in my view it's the best way to motivate the family. bring them back in, but also to change the way people see what's going on. it's a mystery when you see, stand outside the fence there's something going on there, then something comes out. but what happens behind there, you know, once it's introduced to you by your own family member, there's an emotion attached to it. you sense something going on there. so i think that level is essential. you can do whatever campaign you want to do. if that level doesn't p happen, nothing's going to happen. that's where the mayors come in. if we can get support also from the national level having a starting to stir more of a national debate, this event, i think, is very important for that. understanding the importance of shale gas. this is gigantic, gigantic, what we have there. it's gigantic for advanced manufacturing. dominic, what you said.
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because most people think about manufacturing, they think about labor cost. that is so old school. that's so not true anymore. n you know? the labor costs in most cases are going down and down and down and down. it's much more about the level of sophistication in which you can do that, the rate of innovation, the proximity to your r&d center, the opportunity to your most advanced customers, right? so these factories are much, much more critical than the labor cost per unit. >> could i -- just to supplement one little point that klaus made, the national academy of sciences shortly will be issuing a report on the nation's energy work force, and the seven or eight sectors across energy are experiencing much higher levels of retirement, much greater shortages in exactly the same skill sets that we found in the entry-level jobs and early jobs in manufacturing. so that competition across
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sectors for a minimal pool is only going to increase, putting more of a burden on your efforts in the region. but i think it's important to see how this is a growing problem. >> right. >> i was just going to say two quick this things. one is this big data idea that the mayor mentioned and you mentioned, and i think that's where we should just leverage that. that's the capability we have to talk about where these job needs are. we talked about the machinists, right? that is an aging talent, really vital talent pool. so i think getting more transparency because students just -- we aren't aware of what these opportunities are, and we can get that quickly. i really think that's a key element. the second related to that, you mentioned energy. brazil right now, and maybe look in the mirror a different place. brazil, there's a group of business people and regional government leaders who got together, it's called -- [inaudible] i think it is. they basically said, look, we need -- energy's become a huge
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opportunity for us. we don't have the skills to do it. we cannot wait for the education system to change. forget that. so they've got together, they've set up their own vocational programs, and they literally went -- there was someone who went around to every single factory and said what do you need. and they defined that in 190 job types. and they've now trained and employed 90,000 people, right? that's a pretty -- that's just a boot strap thing. and can we've got in this country you talk about the shale gas, there's huge advanced manufacturing opportunities in that area. as i said, ag food, people think that's probably -- you know, who wants to be a farmer where that is? that is, i honestly think you have of a choice, do you want to go to nasa or work in the farming industry? that's where it's going if you look at the technology that's being applied in that area. and i think if we can identify these areas and then get at the regional -- i think it's a
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local/regional area level. we can get a fly wheel going. >> let me ask you all this question. i find going around the country there's unbelievable energy and enthusiasm around advanced manufacturing. but then there's this other parallel path around really small boutique manufacturing which is happening. there's a group out of brooklyn, um, called makers row. and it's like a match making technology where on one side you have people designing new clothes, new apparel. on the other side, they match up to companies in the united states that they, you know, probably a little bit higher cost than you would find at certain, you know, big box retail. but they match up through the web these designers with made in america factories. you see a desire for this. abc had a piece called "made in america" last year. i don't know, it's like a series that they've done. classic series where they went to two people in this grand central station and say, please,
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take off all the clothing that's not made in the united states, and two people agreed to do it. [laughter] and at some point they stopped because this is family television, right? but you do see a sense around the country it's time to make thingses again. it's time to rediscover a craft both with regard to advanced manufacturing, but also with other kind of manufacturing. is that a real movement? how do we, how do we think about it compared to this? >> i think it's because it's sexy now, right? think about the tools that you have now compared to 20, 30 years ago. you've got very powerful software, you've got less expensive robots. so it's not like i've got a press break in a manufacturing shop, and it's the dirty, gray t-shirted spot klaus talked about. it's this convergence of all these technologies, and now i just happen to be making something. so it's a lot cooler to do that. and i think it shows you the strength of the american entrepreneur and the american
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economy. because when you think about all the ways that washington, d.c. has attempted to screw up the american economy over the last five years, and we've pulled out of it. washington did some good thingses. >> right. >> but the american ingenuity that says we're going to figure out how to do this, it was leveraging the power of technology and people just figuring out new companies. so if we can get our act together with a federal industrial policy, i mean, just think how america can shine right now. now, that takes a little humility. we've got to say what can we learn from germany, from japan, from china. but we've got to have time to talk about that type of thing rather than fiscal cliff and dysfunction. >> unfortunately, many of tear companies are here. -- many of their companies are here. so they come here and they basically bring those practices to the united states which has an enormous effect on the skills base. >> i don't -- related to that is in the innovation part, right? we've got to have the innovation and ramp the innovation up.
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because if we just do something that's already there for five years, that's not going to make the cut, right? we've got to get it to the next level, right? and this cannot be addressed without addressing intelligent immigration reform. >> right. >> impossible. >> two other points. one, i think many of our manufacturers, um, when production was in large measure moving offshore, they actually changed their mind item set from mass moddization to mass customization, and that was very purposeful on their part in order to keep their market, um, vibrant. >> right. >> so that was one reaction to what was happening in the broad manufacturing sector globally. but secondly, i would say this is where the critical gap we have in our innovation research infrastructure in this country, i think, has a huge impact. you know, we fund a lot of basic r&d -- maybe not enough, that's summit to discussion -- but
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after, let's take the sbir programs in manufacturing. after the basic research and before the traditional venture capital is available to get to beta testing on early stage production or manufacturing, there's absolutely no financial help. and we are seeing our innovators with great new technologies not being able to figure out how to get to, um, beta-level production capabilities. and meanwhile, we're letting great assets like kodak's eastman business park where there's equipment and talent to do that go wanting or be sold off. so that's part of that gap in our continuum from research to development. >> right. >> to be able to take advantage of our great innovators and actually move to mass production again. i wonder if we can. >> right. >> i know to broaden it out, the other area you were talking about i was thinking about health care again, too, right?
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which is one of the most technically retarded industries on the planet in terms of applying -- >> tweet that. [laughter] >> sorry. you look at even -- [inaudible conversations] [laughter] >> you know, you look at how a hospital works, right? a very micro thing i'd say. the amount of time that's spent because tools are lost, you know, the scalpels and medicines and where -- this sounds like a very basic thing, you know? and i just think that if we can, again, use the data, we make more transparency on industries and how they work for people to then innovate and say, my god, there's -- could we take some of that silicon valley capability and apply it to health care, what productivity improvements would be there? and i just think there's 21 sectors out there that could use this. >> but this whole conversation -- i think what's -- >> could i just make a comment real quickly on small and
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medium-size manufacturers? we think about the big multi-national corporations, but there's more people that work for companies with fewer than 500 employees. most of them are out there duking it out every day focusing on cost reduction. one of the things we've learned with our bluegrass economic advance movement between louisville and lexington is the lack of innovation capacity with the small and medium-sized manufacturers that are feeding the big guys. >> yeah. >> so this is an area of concern for us as we look at how cities and states, maybe the federal government can help with creating this innovation capacity with the small and medium-sized manufacturers. >> the common theme here, and then we'll go to questions, is convergence, integration, the mash-up of sectors. it's not manufacturing in a little corner over there, although that's what we used to do. it really sort of connects to, relates to so much of the rest of the economy. question. right over here. and here comes the mic. >> what a fabulous morning,
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thank you. i'm -- [inaudible] with the naval postgraduate school, but i spent 13 years at ibm and was very much involved in their getting out of the manufacturing world. but i was playing in the manufacturing world. i'm struck by the importance of the fairtive for the nation. >> uh-huh -- narrative for the nation. >> you need to have tv shows, you need to have movies, you need to have heroes, you need to have children's books. i'm trying to get people to write children's books about process. how did that happen? >> exactly. >> and we don't build into educationing. how did that happen? i mean, it's structure, it's process. all that's missing. >> right. >> and i think you need to build collaborative groups. i'm willing to help on any of this because it's a really burning issue or for me about getting the narrative out. you have to make it simple to understand. >> right. >> no -- i've worked for think
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tanks. they produce huge reports that nobody reads. [laughter] nobody has time to read. >> except for the brookings institute. >> maybe, maybe. [laughter] but nobody has time to read all this stuff. and if you don't get it out in simple, clairetive statements, i kept sitting here thinking about a web site i would build with each thing that you're doing, and the primary statement's to make it easy for the public to understand. b because if they don't understand it, not much happens. anyway -- >> we have a communications problem here. >> thank you. >> failure -- >> two real quick things. one, when i was at the department of labor, of all the work that we did and spent billions and billions of dollars, one we spent virtually nothing on was a little magazine called in demand that showed young people in a whole array of manufacturing jobs that went to every elementary school. and we got or more positive feedback from that than anything else we've done, and i think that's absolutely critical.
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i also think we have to in every one of these conversations somebody stands up and says we need another sputnik moment. i think we need to continue to quote our friend rob atkinson and recognize the many sputnik moments that happen every sickle day in this -- single day in the country. >> but on the sputnik moments, in my past life i looked around the executive room, and i said when -- and pretty much everybody was an engineer around the room. so i said when did you decide, when was the moment that you decided you have the spark and you want to go there? funny enough, everybody mentioned a moment that was early in their childhood. >> sure. >> early on in their childhood. it was a very personal thing. out of this came an initiative where we at that time created two boxes that we gave to kindergartens, actually, that retirees could choose and gave to -- one box, a very simple box on basic electrical experiments, another one on chemical experiments.
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because what we saw is that in kindergarten, the kindergarten teachers are shying away from even coming close to anything that has to do with natural science because they don't understand it. they are not trained enough. so we used the great capabilities of retirees and their personal relations to their kids, right? and they could give those away for free. hugely successful. you did the same thing, dominic, over in europe where you had also in germany, yeah, where you had a big outreach very successfully, right? >> question. and then we've got a whole bunch lined up. >> thanks very much. i'm garrett mitchell, and i write "the mitchell report," and i want to say that this has really opinion a fascinating panel, and it occurs to me that the next time around it would be a fascinating panel to have the kinds of people that you're talking about -- >> yeah. >> -- bringing into -- >> great idea. >> -- talking about how they made their decision and what they're doing.
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>> yep. >> and if we had some pictures, if it was visual. >> yep. >> we -- [laughter] we know what law firms look like, we know about "mad men," but we need to see the shop. i want to ask if you could perform a sort of thought experiment which is you have a sort of magic dollar that could have as many zeros behind it as you want, but let's stay with a dollar. and your job is to, is to determine which of the many priorityies that are necessary to attack the set of issues that you've been talking about are the most logical places to invest. so it could be in communications, it could be in k-12, it it could be in this daa component that you've talked
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about, it could be in the linkage between universities and research. where in order to deliver on the promise of this new technology what are the priorities, and where would you put the components of that dollar? >> thoughts on this. who wants to start? >> well, i think one area we haven't really talked too much about today is engineering and the importance of engineering. we're not a culture that looks at engineers predominantly and say you're a rock star, you know? we love you. i want to grow up and be an engineer. it's part of the cultural manufacturing thing. so i don't know if we can have a pr campaign that gets people to think they want to be engineers, but it goes back a little bit to what you said, ma'am, about kind of looking at manufacturing and engineering as being careers of dignity and respect and worth.
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you know, all -- while manufacturing's being outsourced, we've got to remember that's when the technology revolution was taking place and entertainment revolution, and our country's psyche kind of shifted to, boy, there's a lot easier ways to make big money faster and much higher-profile industries. and this blocking and tackling and making things one piece at a time just really doesn't seem to be as attractive a way to do things. so we have to regain that. but that seems awfully shallow to say it's a pr campaign. but then we have to bring back in the talent, the engineers, the innovation, the r&d that's going to fuel this growth for us as well. so i think a lot of it's communication and work force and restoring dignity to these positions that i think -- i know mr. jones down the street, he works at ge, he's one of their engineers, and that's what i want to grow up and do. >> i'd put 50 cents in data at the beginning to get -- and then maybe i hope you'd give me some
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dollars after that, the year after that. [laughter] but i'd put in the data, and that's a bit, too, on here are the opportunities. because there's such a gap. people don't know. and i think once people know they're entrepreneurial enough to figure it out, you know, to start moving it forward. so i just think the data of the opportunities and maybe with a bit of glitz, excitement about what these roles are would be something. i think people are just not aware of the talent. >> um, i'm actually working with mckenzie and the hope street group on that big data issue, so he spent his 50 cents. i'm going to take 50 cents and say we ought to create those alternative pathways to high school graduation that are integrated. um, if you look at educational expenditures, i'm going to get the high end wrong because it keeps going higher, but over 600 billion in public education, only one billion that we attribute to vocational education in this country. that's by or czar.
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and -- bizarre. and then we have this separate work force development system, it really momentum contribute. doesn't contribute. so my 50 cents is there. and then it is on dealing with that gap between basic research and, um, the early stage production for which we can't get venture capital and as a result we're losing all the new technologies with overseas computers. >> i would be very happy with how dominic and emily have just spent the dollar. i would specify the first 50 cents, and i feel that we need the data on u.s. competitiveness. >> uh-huh. >> right? not just on u.s. jobs. because in the end, i mean, the jobs will go away if they are not built on a solid foundation. and it was in the '80s when we had a similar challenge, and i still remember when i read the porter book on competitiveness of nations which i thought was a very, very good diagnosis on where we stood and what
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opportunities we had. and i couldn't agree more. if we had something like that today which is forward looking, we would have some of the elements that we could talk more educated about. and the second 50 cents, i'm excited about that. and the point that you said, emily, before to also have national standards. because you want to have this portable. i mean, it's great to have these kind of initiatives on the ground with, but you want it portable. >> very important. >> there's one other thing real quick. think of how little money we spend as a country on lifelong learning. >> right. >> we spend all this money on preschool, k-12, postsecondary, and the most important thing we know is we've got to keep learning every day after we get out of formal education, yet we really don't understand it very much as a country, and we spend a minuscule amount on it. >> for all of you in the room, for people on the web, these are the questions to ask the deficit panel, right? we put out proposals yesterday, a billion dollars. we have a $3.5 trillion budget. we can find the mney, we can cut to invest in what really
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matters, right? so let's not separate out the conversations. and we're going to talk about the economy over here, and then we're going to be like little accountants over here to sort of cut the debt. we have to join up these conversations. question here, then question there. >> henry -- [inaudible] defense industry north america. another slight german accent. [laughter] bruce, in your introduction you mentioned real and virtual. greg, you shortly touched on it. and i really believe when we talk about manufacturing renaissance, it's a software revolution. and, klaus, you mentioned it. it's your car, you don't use a drill anymore, you use a pc. it's where we send mini cooper, heavy rover up to mars, and the only way to do it is to really test it virtually a thousand times and then it happens. what does that really mean? what does it mean for corporate leaders, but what does it mean for educators? i think if we find this answer,
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manufacturing is super sexy. >> i think, i tell you, we were just building a gigantic complex, manufacturing complex in saudi arabia. so, and this is the first time that they have a full boxite mine, smelter, and then a rolling mill, and they can ship it right from there. so one of my big scares was how do we find local people and educate them? on 12/12/12, we hit the first metal, and so we are already manufacturing there. and i saw how we ramped this up. now, it's highly automated, also, but it's very tough job still, right? so the interesting thing was we now had to do it all from scratch, the occupational training. the thing that was most attractive was this crane simulator which we originally thought we've got to have on site. but when we saw how hugely motivational that was, we basically took that simulator
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and put it right into the occupational school so that it could be used, basically, seven days a week, 24 hours. the answer's right there. when you see what attracts the kids, you are sitting in front of their pcs and playing games. you can turn that into a positive with these things, right? it's actually much easier than i thought it was, to be honest. >> very interesting. question here and then question back there and then, um, and then we may have to have other questions just sent to the mysterious web site. yep. >> i'm mark rodsky. i grew up to be a physicist and an engineer, and the last at least 25 years i've been struggling in various roles in industry, government and not for profit to manufacturing in the united states. one of the things that bothered me about this whole conversation and reading the report is all this emphasis just on advance manufacturing, advanced industries. all very important, but the reason the public doesn't connect with that is the public
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thinks of commodity manufacturing. that's what's in their mind. and that's what we have lost over the last few decades is capital-intensive, used to be labor-intense intensive, commodity manufacturing. and that's something that just doesn't happen very easily without, i think, some sort of government help in some way. for example, by road maps, finding the missing ip greed credibilities, the missing floor technician to fix the machines and, well, now a days the missing machines in the united states. could you address that specific area of what might be done to enhance commodity manufacturing? >> thoughts? >> energy is a big part of it. energy, i mean, because many podty -- i mean, we are in a commodity, i mentioned the
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refinery part. refinery part, nothing special about refinery. my people would kill me with that sentence. [laughter] but in reality you can do it anywhere on this planet. so what is critically important? it's not the skills. i mean, if you don't have the maintenance people, i can't do it, but i can educate them, right? but energy is a huge point there. what is the reason now we are now running it as a full plant and -- [inaudible] who was on this panel a year ago or so is now putting huge amounts of money to build, i think, in texas and someplace else, in louisiana i think it was, the second place where he's building new refineries also, right? but at the same time, the normal commodity business, i mean, a normal, no differentiation job, that will not come back, right? that will not come back. why would it come back, right? we have to have differentiation. we have to have innovation. that's why i think this debate about competitiveness is so important that we are not
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falling into the trap and wasting national resources. >> i have a question over here. right there in the middle. yep. >> thank you. susan -- [inaudible] the mckenzie global institute. i'll try to keep it short. it's been a fascinating panel. i'm surprised i haven't heard one word all morning, which is exports. so my question to all of you is, is this manufacturing renaissance for domestic consumption, or do you envisions the u.s. eventually as an export platform to the rest of the world? and then a second related question is if you put on the hat of multi-national corporation whether u.s. headquartered or foreign and you're considering where to put in your next plant, what would be the number one barrier you would point to in u.s. competitiveness? so this is a little bit different from the earlier question which is if you were considering a corporate investment, what would be the
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number one thing you would point to. i've heard immigration, taxes, skills, um, infrastructure. i'd love to hear from all the panelists. >> so, first, are we producing for the domestic or global market? >> well, in our case in this bluegrass region of kentucky we have a specific program on export assistance for small and medium-of sized companies. the big guys know how to do it already. so part of this american renaissance is creating a culture of exports. it's just what you do. >> yeah. >> and if you're an industry that has an international competitor and you don't export, i'd say to people you're probably going to be out of business in five years. so there's all types of reasons to figure et out, and the smaller companies need some assistance. but i think you see that's ongoing throughout the country. >> dom? >> yeah. just to sort of tease my colleague, b you obviously weren't listen bing to what i was saying in the beginning. i think i did make one comment that it was, you know, 11-12% of gdp, but it's 45% of exports.
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so i think it already is a big driver of it. i just see a couple of practical examples. i think ford now is going to be manufacturing the lincolns and some of their suvs globally for china. it will be done in the u.s. so i think there's a huge export with the space side. we learned this in colorado. i think there's something like 30 countries that are now with space program, right? that are moving. and some of them we may want to support. argentina, believe it or not, has a space program that's out there. and i think these are areas where -- health care will be another one, where people will will do it. i think it's a vitally-connected part of exports. >> and i think most of our research at the manufacturing institute for the past 3-5 years has shown b that, um, the lack of an education-skilled work force is always one of the top three pain points of
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manufacturers who want to stay in the u.s. and/or choose a new location in the u.s. but it goes, vacillates with the business climate which goes back to taxes and regulatory structures. and the skilled work force. but they're always in the top three of where they're going to choose their next siting. >> any other thoughts? >> come down to point out that the best place to locate a new company in the united states of america is in louisville, kentucky. [laughter] i will save all of y'all a lot of work and just, we're happy to have you. >> now, i think you should say that again and stare into the camera. [laughter] >> louisville, kentucky. >> you were or a businessman in a private life. >> first of all, i just want to thank the panel, because i think what is so critical particularly in this town is to have an affirmative, positive conversation about where our economy can go. not delusional, right? based on what is actually happening on the ground because
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of both global dynamics and because of some very, very, very smart policies and practices being invented at the city and state scale. thank you very much. [applause] [inaudible conversations] [inaudible conversations]
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>> live from the brookings institution this morning here in washington where they are hosting a forum on jobs, innovation and the economy. panels looking at strategies and best practices to spur economic growth. also delving into what role the private sector plays in all of in the. the next panel expected to start in just a moment. it'll be on deficit reform, resolving uncertainty and promoting innovation, moderated by martin bailey, fellow of economic studies at, in the bernard l. schwartz chair in economic policy development. among the panelists, maya macguineas and robert mcdonald who chairs the procter & gamble company. that expected to start in just a moment here on c-span2.
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[inaudible conversations] [inaudible conversations] >> again, this forum on jobs and the economy expected to start in just a moment. very quickly, here's what's happening in congress today. the house gaveled in this morning at 10 eastern starting the day with the reading of the u.s. constitution. members also or considering a pill providing disaster aid --
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bill providing disaster aid caused by damage caused by hurricane sandy, that is. first vote's expected about 1:30 today. live coverage beginning with general debate on c-span and, again, the reading of the constitution is underway right now. the senate's still in their recess, they'll return monday, january 21st at 11:30 for a joint session for the inauguration. legislative business will start at 10 a.m. eastern tuesday the 22nd. you can see the senate live on our companion network, c-span2. >> okay. so if everybody could come in from coffee and sit down, we'll get started on our second panel. and we're delighted to have a terrific set of panelists, lew canadian -- kaden, maya macguineas who has been a stalwart leader in washington dealing with debt problems and is now involved in or leading the fix the debt campaign. bob mcdonald who is the ceo
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and president of projector and gamble -- b procter & gamble, and ralph schlosstein who's the ceo of evercore. let me give a little bit of context while everyone's filing in the room. i'm martin baily with the economic studies program at brookings. if we cast our minds back to the 1960s, the 960s, obviously, was a troubled decade politically, but economically growth was pretty strong. productivity growth was strong, economic growth was strong, unemployment was low for really almost all of that decade. and then that was followed by, um, i don't know if you'd say a lost decade, but a much more difficult period economically in the '70s and the early 1980s. and the thing that hung over the economy at that time was inflation. we just couldn't seem to deal with the inflation problem. so we had a deep recession in '74-'75. we had another recession in
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1980, we had another recession in 1981-'82. so double dip recession. and then finally, paul volcker who was chairman of the federal reserve and his colleagues decided to whack the economy over the head really hard and take the inflation out of the system. and finally it did, although it took a while. really wasn't until the fall in oil prices in '86. but we really got rid of the inflation demon. and i think in some ways laid the groundwork for the period following that in the 1990s when we had strong productivity growth, we had strong markets really starting in the mid 1980s. so the analogy in my mind is we have this deficit that's now hanging over us, and for some of the same reasons it's a really hard problem to solve. um, it lacks a federal reserve. so we don't have the equivalent of an actor like paul volcker who can come in and say, okay,
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we're going to tackle this problem. and this is unpopular, but we're going to do it. instead we have, obviously, the decision being made by congress and the administration and the two different parties, and we're just caught up in the political gridlock trying to deal with this very difficult problem. you know, even if we, even if we had sort of unity of purpose, it still would be a ard problem to solve -- a hard problem to solve. we are still in the process of ree covering from a really deep recession that was brought about by a financial crisis. there's still a lot of slack in the economy, so from, you know, a standard economics, keynesian, if you like, we still want to get more demand and growth in the economy, and so fiscal consolidation is, goes in the wrong direction in terms of getting us back to full employment. but clearly, it is necessary over some time horizon because the deficit path really not sustainable that we're on. so we need to sort of deal with
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the deficit but not kill growth. um, now, this panel is part of growth and innovation as you've heard several times, and i do want to mention one sort of hopeful note along with the problems that i've just outlined. there are a set of folks -- bob gordon, tyler cohen, i think there are others -- who sort of say we've seen the end of growth. no more growth. we've now just got to sort of settle down and deal with the fact that we're not going to have anymore growth. and i think the evidence is really strongly against that. there is in your pack, and i'm doing a little bit of a plug here, an external senior fellow here at brookings as well as director of the mckinsey global institute, and he and i are working on a project with the support of others looking at in this question what are some of the game changers, what are the ways in which we can get
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innovation and actually as we get out of this mess on the deficit and the recession really start to get stronger growth in the economy? and the thing that's really needed, the thing that we didn't have in the first, even the first seven years of this century was sort of innovation-driven, output-driven growth. we had a lot of restructuring productivity, but we haven't really had it for some years now real output-driven innovation and growth, and that's part of what we're looking for and part of what this project at brookings and working with the mckinsey global institute is what we're looking for. so that's my plug. that's in your, some beginnings of that are in your pack. all right. now let me turn to the panel, and i'm going to turn to you, lew, first. now, how do the responses to this budget deficit and the reforms and what's going on, how do they impact the broader economic policy challenges as you see them from your vantage
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point having sort of ridden the roller coaster of this recession? >> thank you, martin. let me just make two or three points on that. first of all, it's obvious to anyone who's followed these debates in the last year or so or watched events in europe that political uncertainty is the enemy of economic growth and investment. we've seen the effects of that on the pace of recovery in the united states, and we've seen it even more in stark leaf during the -- relief during the last year in europe. at the same time, the dynamic qualities of the u.s. economy also when contrasted with europe and other parts of the world suggest and demonstrate on a regular basis that notwithstanding the political uncertainty, there's a great deal to be optimistic about. there are a good many positives
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when you look for signs in terms of the prospect of of the faster pace of growth and recovery if only the political uncertainty were changed by progress on fiscal balance. and those signs are more apart every day -- apparent every day. you'll look at the positive changes in different segments of the housing market and housing finance, notwithstanding remaining challenges. you look at the pace of recovery in the auto industry, a market with $14.5 million in sales last year and the prospect for more this year, notwithstanding the overall economic conditions in the country till in a slow -- still in a slow recovery. it is very encouraging. and i think most important of all you see the dynamic
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qualities of the entrepreneurial and venture community in this country. you contrast that with the lack of any counterpart in europe, you see tremendous benefits. always been a source of the entrepreneurial -- the entrepreneurial spirit has always been a source of strength in this country in comparison to others, and it's in stark relief today as the venture community spreads from its concentration in california to more and more metropolitan centers around the country, and the strength of the capital markets at every level of private and public capital raising is very positive. and even in the jobs market which is the most stubborn negative on the, in the picture of the u.s. economy as you saw in the discussion of the last panel, a good deal to be more optimistic about in the revival
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of manufacturing jobs and the increased productivity and the reshoring and the other issues that were discussed. but the bottom line is that confidence is everything in patterns of investment as, indeed, it is as i know only too well in financial services and banking. and at the moment confidence levels remain low, and that's a discouragement to certain kinds of investment. the levels of of liquidity or investment standing on the sidelines ready to be put to use are very high across z the business community and the financial community in the u.s., and the spotlight is on this town and whether our political leaders are capable of resolving in this.
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now, also on the positive side i think while many of us would have preferred a broader framework -- and there'll be more discussion about that from the other panelists here as well as for me, the practical reality we know we can dissect why that was and why they missed an opportunity and came down to 24 or 48 hours and were able only to deal with the tax issue, but for the most part that's history at this point. and the fact that they were able to do that is at least a step forward. it added, as you know from the summary of the state of play that the president gave yesterday in his lengthy press conference, it added 600 million to the billion four of spending cuts that had previously been enacted and put into effect in the last two years, and the
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interest savings on top of that come to a total overall of $2.5 trillion over the ten-year period that we all have gotten familiar with as the measurement period for do -- for deficit reform. and 2.5 is not all the way to the target of 4 that almost every independent group has adopted as a reasonable way to stabilize the debt in relation to the growth in the economy. you could make an argument that a little more or a good deal more would be helpful too. but $4 trillion over ten years is not a bad target, and 2.5 is a fair bit there. and so we move to the next chapter which promises to be messier, uglier, nastier than the first one. but i think there is some room
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for optimism because as we saw the first time around, i think after the election both parties at the leadership level recognized and came to a conclusion that it was in their interests and their political interests longer term to resolve this. that doesn't mean that they like each other, it doesn't peen necessarily that they -- mean necessarily that they communicate effectively every day. it doesn't mean that the process is neat and clean. but it's a fundamentally important starting point if the politics can be neutralized short term, which is very difficult in this our government, i think it remains true that the four or five people who count the most have come to a conclusion that it's in all of their interests to resolve this. so my own view is to be a bit on
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the optimistic side as we go into the next period. however, to put it in the context of broader economic policy challenges as martin's question did, i always start with the proposition that necessity does not equal sufficient of si. sufficiency. deficit reform is critical at the moment. we all foe that, everyone talks about it, writes about it on a daily basis. but it's not sufficient to meet the economic challenges we have. because the fact is we have a fiscal deficit, but we have many other deficits, some of which were discussed in quite effective fashion in the last, in the last panel. so i'll just listen for now. we can go back to them later. we have an education deficit. we have a skill development deficit that is closely related to education. we have an infrastructure,
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development and repair deficit of enormously important proportions. and you need only look at the experience of other countries coming out of the recession including countries with very different political systems than ours to see the close relationship that infrastructure investment and development has on the likelihood and the pace of recovery from a severe global downturn. we also have if not a deficit, an important and urgent feed to address -- need to address the issue of energy independence, an opportunity that more than ever before is sitting right in front of us ready to be advanced in the next year or two. but again, it requires leadership and initiative in
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washington. and immigration reform, again, a subject that was discussed before. one more word, finally, about the process, and for this i kind of go back to a much earlier part of my life when i was a professor of law at columbia. one of the subjects i taught every year was negotiation, negotiation in a variety of contexts from international to commercial and transactional to labor management disputes. and i came out of that experience in the practical experiences accompanying it before and after believing that it's a mistake to keep score on a daily basis in difficult negotiations especially in the political environment where each participant has multiple
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constituencies to which they're accountable in some fashion and paying attention to. and so you take the last few days. we're clearly in a state of play that involves positioning, and we can be critical -- it's easy to be critical about why that's the kind of reaction everybody always has in a labor dispute. why can't they just get in the room? they know the range of substantive outcome. it's not a secret, it's not hard to find. why can't they do it this afternoon? and similarly, observing events in the fiscal negotiations, everybody looks at it and says, well, why can't they get those four or five people around a table in the roosevelt room and resolve it? the substantive outline has always been there, it's been there in every public and private group, it's been there in every private conversation with small groups of members of
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congress from both sides. it's not elusive. the details can be complicated, especially on issues like health care costs, but the broad outlines of a resolution of these problems are not hard to define, and we know that if we look at the results the discussions in the summer of 2011 or the results of the discussions in december. there was barely 100 or $200 billion over a ten-year period separating the principle, but they couldn't quite bring it to a conclusion. i think it's preferable not to keep score that way, not to look at they like to talk to each other or why haven't they met more often in the early stages, but rather to see this as a messy process that's going to unfold over the next six, eight weeks and the important thing is whether they get to the finish
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line this time, not how -- it's unfortunate we have to go through that process. it will take its toll in terms of economic activity. but the price of not reaching an agreement is far more significant than that, than that process. so i take some heart once again in the fact that in every conversation i have with anyone who matters more than most of us do in this process they see both political and national interest advantages to their side of the debate in reaching a resolution. one has to hope that they do in a timely fashion. one final comment, i think probably all of us would agree at some point in the future we'll get a consensus on this in the political process that the debt ceiling has no rational place in this.
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the president addressed that yesterday, but the fact is playing russian roulette with the u.s. economy and the wellbeing of our population has no place in an honest debate about how much spending should be cut, how much investment should be made to address these broader economic and social deficit ands how to resolve this and get on to other parts of the national agenda. sooner or later, i think, the congress and the president will agree. you saw approaches to this in senator mcconnell's comments in the last couple of weeks and, obviously, in the president's that the key control is in the authorization and appropriation process, and the ability to pay those bills through either
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revenue sources or borrowing ought to be attached to the decision to spend, not used as a point of leverage in many broader and more or important negotiations. >> thank you, lew. can i just follow up, and i don't know if this is a little bit of a tan gent, but i think i just want to ask you because of your position in the financial sector you say that uncertainty is holding back recovery, and i agree with you completely. um, do you think funding is also? i mean, we know that a missing piece of this recovery is business hiring, business investment. the large businesses generally have fairly favorable access to capital markets, but a lot of small and intermediate businesses do not. do you think lack of funneling, and is this a legacy -- of funding, and is this a legacy of the recession? is this something that's come out of the financial regulation,
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or do you see that as part of the problem more sosome. >> yeah, i tend unlike some of my peers and competitors not to put much weight on the regulatory. all of us have specific issues, definitions that we would do differently and opinions that we voice every day, but the core elements of the regulatory reform that are common around the world, i think, were necessary coming out of the experience we had in the reform and should not so long as the playing field is level, the u.s. institutions will be strong and capable of responding to them. on the funding issue, i think it's a question that has more parts to the answer. our capital markets are very strong. those borrowers who have access to them, which tends to be larger enterprises, have multiple options to choose from in funding investments that they
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choose to make, assuming they're creditworthy. and the same is true of bank lending particularly for larger enterprises. the major banks have stood by their large customers pretty systematically through the crisis and certainly in the recovery period. the problem comes in as you go town the chain -- go down the chain through medium and smaller enterprises and as you get into households where the, where the experience of the particularly in housing finance and consumer finance. we're in a transitional period where we haven't yet figured out what takes the place of the consumer finance industry which has been largely destroyed for -- it's a decent business,
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and you can see examples that have survived. there are basic decisions to be made about how much it should be regulated and how much it should be supplied by a shadow financial services part of the industry. .. >> we are in the middle of the mess or sort of avoided the miss
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calg cliff. how do you see things evolving over the next couple months, and how is this going to play out? >> okay, well, if anybody know how things play out, i would be thrilledded to know that answer because it is one of those more confusing moments. i'll start with that it's a moment that feels like there's a lot of good news and awful lot of bad news. the conference today focuses on the overall economic picture and the pieces that go into fueling economic growth and innovation. there's so much good news to to- to be had. there's ideas on what can be developed to help growth in the country and use those and have a positive outcome. if one, the whole fiscal -- if you feel it's sad to be involved in it, feels like this, but it's an issue that is gumming up the wheels of everything else. there's no oxygen left for any other issue. as we want to think about education, immigration, and
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energy policy, this one is going to have to get resolved in one way or another before we can kind of go back to the exciting idea to lead to the next wave in the economy. the other one is the political environment where we actually -- oh, boy, sorry. >> now, i can't blame the add -- audience. >> ignore it. it's going to be hard to do, but we're going to do it. the other piece is a political environment where we have the ability to fix the situation. we know what the fix is. you need a comprehensive debt deal that's big enough to stabilize the debt, and we all remember the period when you were trying to balance the budget. we're not there. we're not going to be there any time soon, but you want to make sure that the debt is not growing faster than the economy, that it's on a downward path, and we know the problem is so big that to accomplish that, you have to look at every part of the budget. you have to look at defense
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spending. you have to clearly focus on looking at health care costs. that's a growing facet in the economy. we have to fix the social security system, making promises bigger than what we can pay out down the road. we have to raise revenues. we started down that path, but what we have not done is looking how to do it while overhauling the tax system which when you want to raise revenues, you can do it in a good or bad way and increase competitiveness or modernizes our tax system. we know what the answers are. we'll fight about the specifics of all of them and how fixing the problem would look like, but we don't know at what point the political system is willing to make all the choices, which are difficult, compromise on both sides, and sort of put the issue to rest so that we can go back to fighting about all the other things we're going to fight about. i think the fact you can see what the policy solutions are and we're past the era of pretending it doesn't matter,
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but everybody recognizes the threat it puts out there. you can't possibly imagine real growth coming without a sense of stability without knowing what the changes will be so you can have planning, investments, job creation, all the necessary pieces of moving the economy forward. you know, the big wild card is when people are willing to make the tough choices instead of using them to fight in the normal political boxes. what do i think is going to happen next? it's already off on a different path than i thought was the best. if you think about prospect theory which basically says when you deliver good news, you want to do it in lots of little pieces, like, first you want to tell someone they've gotten a promotion, and then tell them they have gotten a raise, and then they have a bigger office. each piece of good news is good and makes people happier. if you are doing bad news, and just think if you are waiting for an airline that's going to be delayed, you just want the bad news in one big piece, and
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that's true of so many things. that applies to a budget deal. what we're doing is we're breaking out the way we fix the budget in little pieces. we had savings early on a couple years ago in continuing resolutions. we had savings that came out of the budget control act. we talked about the sequester, which i think is not likely to hit, although it might be left in place for awhile, but when the super committee failed, sequester was put in place. we just raised tax rates on the well off. it's in pieces. each one is a bloody political battle. each one leaves a party -- rather than declaring victory, more angry at each other than they were before making it harolder to do the remaining policy issues. we have to deal with health care costs. the truth is we don't know how to fix the system in its entirety. we have to look at ways to control health care costs to get in control of our costs and cults in medicare, and we're
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going to have to go back and do this every couple of years, but we have to study what works and put more policies of what are working in place. we have to deal with other entitlement thes social security reform is an intensive issue in the country. it's always a political tough battle, but the longer we wait to make changes, the more difficult it is for the people who depends on the programs. no question about that. we have to go forward with tax reform which is great talking about it broadly. the tax code is a disaster. none of us like the tax code. talking about the ability to broaden the base, lower the rates, increase the revenues, that's a desirable system in thinking about how to reform the tax code. there's tough specifics about the fact we have to deal with the home mortgage deduction, state and local taxation, and then it's more difficult. what we've done 1 the -- is the easiest pieces. capping is easy.
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you don't even have to talk about a single policy. taxing the 1% is easy. even if you're the 1%, it's not the hardest thing in the world. now we have left is the hardest part. it's how we unravel the next bits so clearly the next piece has to focus on entitlement reform. that's the biggest fix yet to be addressed. we have three action enforcing moments in the next couple moments. the sequester extended for two months, and it has broad based across the board spending cuts, just a wrong way to do policy. some of the spending cuts might need to take place, but don't put them all in place abruptly because we are dealing with the recovery. you want to phase in changes gradually, and you want to pick and choose and policymakers to pick and choose rather than saying it's too hard. we're just going to let a cut go in place and not do our jobs. that's really unforth give -- unforgivable in a way to make the policies. second, you have the debt
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ceiling. it is the wrong thing to hold the country hostage. it's going to be a play. there's going to be a fight. in the past, it was a speed bump that reminded folks we were borrowing too much and we had to make changes. it could be a useful reminder, not if it goes as far as if people start to worry about the face of the u.s. government doing economic government, which is what we saw last time. the third piece of the continuing resolution, the fact that government spending expires, and sort of it triple witching hour of the three issues is another kind of fiscal cliff, and the question is is it going to force action with the hardest feeses that are still remaining or the fact that when it came to the fiscal cliff, they still, for all intensive purposes, it's good we didn't go over the cliff. it's good we raised revenues, but we basically punted, do what we always do in washington, punted the ball, all the hard choices, tried to declare a bipartisan victory, but it was not there. the question is what makes the next action forces moments more
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effective in getting us to really take on the policies, and this is part of the question, that will deal with the necessary savings for the next ten years, but just as important or perhaps more, put the policies in place that are going to bring savings down gradually over time in the next ten years because it's the long term that really is a threat to the budget. if you look at any of the charts -- this chart -- probably should have brought something better than that -- >> we get the idea. >> i mean, over time, it's the growth and spending that comes from health care, our age lings of our population, interest because we're borrowing too much, which really blows up the budget, and making gradual changes now, whether it's through fixing the way we measure inflation or promising to gradually raise the retirement age down the road, those small savings that compound wouldn't save you so much money in the short ore medium term, duh a great sense of good in bringing long term
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balances back into place. the question is how to help the political system, which is not in great shape, be forward-looking enough that it's willing to make a lot of those changes now to do is great amount of good down the road, and i am -- hard to be on the mystic now. the fiscal cliff deal could have been better. changes will happen because they have to happen, and we are the luckiest country in the world dealing with this because of the gifts market give us. i've seen the safe haven of putting changes in place than any other country. we don't have to do them quickly and abruptly. we can say we're going to do them and start them down the road buying us more time for an economic recovery. we'd be so foolish to walk from that opportunity toot this in an easier way until markets push us to. i hope and continue to believe we will not do that to ourselves, but make choices in a way they are an advance to give us planning room.
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the truth is we waited longer than we should have. the political system's willing to focus on whether it's the next election cycle or partisanship or the public issue. the bottom line is not only do we have to put these savings policies in place, we have to thoughtful about how we do them, and when we talk about spending, we have to think about how we not only bring spending down, but readjust it and reprioritize it. we emphasize investment, not consumption. with an aging population, you have to bring in more revenues than in the past. if you do that in the same outdated anti-competitive tax system, it's going to choke the economy, and, yet, if you use the opportunity and bold about the tax reform needed on the individual and corporate side to kind of open up our economic systems to a globally competitive system, you can do this in a way that's good for
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the economy. we have hard choices to make, and we should give ourselves the time and thoughtfulness to put policies in place that those that deal with the deficit and also help to adding stable in terms what was as well as build economic growth. >> let me pick up on one piece of that around health care. as you know, government spending on health, not necessarily the biggest cause of the deficit right now, but if you look at 20 years, 30 years, it's an aligator that swallows everything. i was on a panel last week, and there was a lively argument around should we raise the age for medicare, should we just try to change the system and move away from fee-for-service, has the obama administration actually done a lot to lower the cost of health care going forward? so we don't need to do much more, what do you guys think are practical terms to be done on
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health care because it's a really unpopular issue? i mean, if you poll people, they don't want to cut medicare, so where do we go in dealing with that piece of the puzzle? >> yeah. that reminds me of how when i was in graduate school, i went to graduate school to study fiscal policy, and it was at the time when they balanced the budgets. i thought, what do i do? change careers, and the problem is solved. i realized the long term problems were there. i had to make a choice whether to study social security or health care. social security is easy. i jumped into being a social security expert because health care is so hard. that's not to say i have not been studying health care over the past year because there's really no other issue at the core of all of this, and the problem is that we don't know the answer, and the best thing that we can do right now is be putting in place as many different attempts to control health care costs and evaluating what works so we don't know whether the new health care reforms have worked yet or not.
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we've seen health care costs coming down, and that could be an anticipation of what's about to happen. that could be temporary. it could be permanent. one thing in all of this, in fact, is better data; right? gather information, analyze it, and figure out what's working and doing more of it. i think one of the important things that happened in the changes that we just made were the exchanges on health care. that does give you the room to put an increase in the medicare age which you wouldn't have had before. that would have been devastating to people before, and now that you have health care exchanges, it makes sense as a policy to think about increasing the retirement age for medicare. at least it lines up with social security. as we live longer, we all know this, the huge health care costs are not the biggest ones right now because the costs of aging are the biggest costs right now. it's an incredible cost on society as we age as we are, and we have to find productive ways who can to be in the work force
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longer. creating those incentives is an important one. with health care, the most important area is in the incentive structure, the cost sharing structure, how we set up the delivery system so the incentives in the delivery system and incentive for the consumers of health care, none make sense right now in health care from any economic perspective. we have to switch those. you can do that while those depend on the systems without shifting the costs on people who cannot afford it. if you have a payment incentive, incentive structure, there's a crummy system, and if it doesn't fix all of it, it's a big start. >> turning to bob donalds, as i said, the president and ceo of proctor and gamble. you have a very successful company, a lot of operations in the u.s. and around the world. what do you see as some of the most important growth promoting strategies that can be followed here? >> thank you, martin.
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i'd like to talk about two important factors that are important for growth promoting strategies. the first, discussed already in some length by our panel, is addressing our deficit trajectory so that our public debt doesn't crowd out our private investment. that will require reforming the entitlement programs as mia and lewis talked about because they are the primary drivers of the spending growth. if they are not under control, they will not be secure for future generations so that's critically important. the second thing, and i think equally important is improving our country's global competitiveness, and in doing that through free and fair trade as well as through a more competitive and comprehensive tax reform as mya referred to.
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the recent action on the fiscal cliff is a short term fix. it avoided us falling off the cliff and sending the economy into recession, but it really failed to address the larger issues affecting the deficit and also the economic competitiveness of the united states, and those of us who run global companies, obviously care very deeply about that. preserving the opportunity for a imrensive and revenue knew trail tax reform is a critical and very important to creating pro-growth tax law that will enable american companies to compete effectively against companies that are domiciled in other countries around the world. we need a level playing field. we don't have a level playing field today. the united states has the highest corporate tax rate in the world, and also, the united states is one of the few countries in the world with a system that is called a global tax system rather than a
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territorial tax system. during the 113th congress, we're going to continue to advocate for comprehensive tax reform that broad pes the base that reduces corporate tax rates and that moves through a competitive territorial system. proctor and gamble pays taxes around the world, and this should be a level playing field so each business has the confidence of knowing they pay roughly the same amount of income tax that its competitors in markets both at home and abroad. in terms of deficit reform, the obvious problem that must be addressed is the fact that the united states spends at a rate that far exceeds the rate of revenue that we're receiving. this situation often occurs during recessions as a lagging economy produces less revenue
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from income and payroll taxes while government spending programs continue to expand. the longer term problem is not related directly to the recent recession despite the unprecedented amount of fiscal stimulus through new government programs. for example, some economic literature suggests that when a country's debt to gdp ratio exceeds 90%, the country's long term gdp growth rate structurally slows down. this adversely affects everyone's potential standard of living. the u.s. deficit now exceeds 100% of debt to gdp ratio so we already may be experiencing the initial impacts of extended deficit financing. the longer term problem is to a very large extent the product of key entitlement program that are an important part of the nation's safety net for the
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elderly. slowing the growth of spending in the nation's entitlement program help make programs secure for current and future workers, and we think that's very important. by 2035, there's only two workers per beneficiary, and a typical 65-year-old retiree, has a 50% longer retirement than occurred in 1995. this is a very serious issue. currently, the social security retirement is as a pay as you go system that provides more annual benefits than the payroll tax collects. if left alone, this eventually will need to insolvency, particularly with the rapidly increasing number of baby boomers who are retiring every day as was referred to by mya and louis. i don't have the programmatic
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expertise to suggest the right solutions, but it's important to analyze the acceptable message to assure that these programs can be available to future retirees. reforms can and must be adopted that don't undermind the benefits of current retirees or obviously, they will not be accepted. medicare and social security retirement programs and benefits must be preserved for the remaining americans who are now participating in the work force. it can be done, and if we act sooner rather than later, we'll have an easier chance of getting it done. in terms of innovation, innovation has been the core to proctor and gamble's success over the 175 years of doing business. we spend about $2.5 billion a year on research and development. that's 40% more than our largest competitor, and we spend $400 million a year on consumer
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research trying to understand the unarticulated consumer needs that we can design products to solve. innovation is the life blood. it's the primary way to accomplish our purpose of touching and improving lives, and innovation is what prevents common -- commode -- comidization. our company demonstrated the capability to invo vat -- innovate reliably and successfully. we have the core business and increased our focus on discontinuous innovation. think of that as innovation of wholly new categories not thought of before such as when we introduced swiffer as a way to quick clean your floor or blinds or innovation as pods,
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our new single use laundry detergent to be used in the machine, the most concentrated detergent formula today. we transfer ideas around the world leading to growth around the world. for example, we -- this pods technology that we've invented, we're now in the process of expanding around the world, and that's leading to jobs overseas because our plants have to be near the consumers we're trying to serve. we can't export pampers disposable diaper from pennsylvania to china and make money on it. we have 150 factories around the world, but nevertheless, that business that we do internationally results in jobs in the united states. 20% of our jobs in the united states rely on our new national business. 40% of the jobs in the state of ohio, our home state, rely on international business. that international business and being globally competitive is
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incredibly important to the growth of our economy and to the growth of the economy in the united states. we have the world east best global companies in the united states, but right now, we are putting them at a disadvantage with our tax policy, with our fiscal policy, and with many of the things that i already talked about. thank you. >> thank you. i, actually, agree with you strongly that we have to do tax reform, and we can't have taxes that make our companies uncompetitive, and i agree with you that weave got to reform entitlements and bring down the cost of entitle ms -- entitlements, but as leader in the business community, you have a problem relaying that message. how does the business community sort of frame its message to the part of the debate about what to do? >> well, i think -- i think any american who knew that we had the highest corporate tax rate in the world, second to none,
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would agree that that's probably not a good idea. particularly, since, you know, the american people are the workers in our companies. >> uh-huh. >> it gets back to, i think, martin, the global competitiveness. having the highest corporate tax rate in the world is not globally competitive. having a a worldwide system that prohibits u.s. based multinationals, and we have the best one, moving money from one country to the other, or even moving it back to the united states to make an investment here -- >> right. >> and pay double taxation on it is not a level playing field, and i think we want our american companies to have a level playing field with the international companies they compete with. it's interesting. i was in china not too long ago, and i'm the chairman of the u.s. china business council, and the government of china was asking our help to help them understand
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how to create globally competitive companies, and they were asking american companies, american ceos, to help them create globally competitive companies. i think we need to reform our system to allow our companies to be competitive before international companies, who have advantages given to them by their government and their systems, become fierce competitors. >> i am involved at the moment on a project on financial regulation, and one of the things we're looking at is do we have to change the architecture with the number of regulators, and i was told that the chinese are in the process of setting up their regulatory system, and they came to the united states and said, well, should we do is the same way as you do it? i think we said, no, maybe not. [laughter] >> you can talk about that one. >> ralph, you're really part of
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a private equity company, investment company. what do you see as the significance of the fiscal debate for innovation in the u.s. and the economic performance here in the u.s.? >> well, i think the -- i agree with a lot of what's been said already, and i think this whole fiscal issue centers around the competitiveness of american business and american companies and american production in the global economy because we can't go back ten years or 20 years and hope that one way or another through trade protection or other means we'll insulate or protect our businesses or our workers from winning globally, and so the only path to america winning economically is that we create a regulatory environment,
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a tax environment, and a competitive regime here in the country that actually allows our businesses and our workers to win in that global competitive game at the moment. we have some extraordinary assets in this country. we have a highly educated, motivated work force that in many respects out performs -- not always out educated, but out performs from a productivity point of view workers in virtually every other country. we have the most efficient capital markets in the world. our companies have the lowest cost of capital of any companies anywhere around the globe. it was eluded to earlier that we have a spirit of entrepreneurship and innovation and capitalist system and
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commitment to a capitalist system that is really the envy of virtually every other country in the world, and we also have increasingly -- it was eluded to in the earlier panel, and have always had very strong natural resources, but with shale oil, shale gas, and the in-- incredible strength of our agriculture industry, we have great natural resources as well. there's a lot to be bullish about in this country in terms of our economic opportunities, but this fiscal deficit, our fiscal policy is an enormous cloud or retardant on us reaching that potential. you know, i work in the investment banking industry. i used to be in the money management industry, and there's a phrase that sometimes gets
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applied to companies, and you'd say about the company, good company, but bad capital structure and maybe bad management as well. that was used to describe a company that had, you know, great products, highly motivated work force, was winning in the eyes of the consumer or whoever the purchases of the products were, but they maybe had too much debt or they had a management team or structure that just didn't take advantage of the enormous opportunities that they had in front of them. i think we're perilously close in this country today to the phrase "great country, but with a bad balance sheet and a bad managerial structure." that is the core of the fiscal issue that we face here in this country today, and why is that a concern? because if we don't address
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this, we will be effectively prevented just like an over leveraged company is, from making the investment in, you know, infrastructure, in education, in research and development, that are the key to us winning ten years from now, 20 years from now, 30 years from now, and which ultimately are critical to sustaining a high level of growth and a high level of employment in the country. we'll do a second thing which is even in some respects more venal. we'll saddle our children and our grandchildren with the responsibility for paying off or paying down the debt that we incurred because we wanted a level of government, but we're not prepared to pay for that level of government, and so this is a really critically important thing, and as i think was said,
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i think the -- and lou as well, i have not met a single, you know, democrat, republican, even socialist, we have a couple of those in the congress as well, or independent who doesn't have a pretty clear idea of how this -- what the answer is, and it's very frustrating for, i think, many of us who don't spend a lot of our time in washington that we're not getting to the point where it's so clearly we need to get because we don't get this behind us, there are three, you know, massively important issues to addressing our competitive. corporate tax reform, individual tax reform, and entitlement reform, and if we don't get a big start at addressing our fiscal issues, i think we're going to miss an enormous
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opportunity to address all three of those issues, and let me just close with one comment, and lou referred to the importance of confidence in, you know, growth and investing, and, you know, you run a business like bob does, and you have the uncertainty of the fiscal cliff, and the uncertainty about the direction of the economy, it makes you a little bit more cautious about investing. it makes you a little bit more cautious about hiring people because it's -- if we go into a much weaker economy, then you have to reverse course, and you have an intense pressure on your earnings. this whole issue of, you know, confidence in our government structure and the confidence in the ability of washington to address these critically important issues is pretty fundamental to, you know, our economic growth and to our -- to
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the success of the real economy and certainly it gets reflected very quickly in the capital markets, but we saw in july and august of 2011 that a sloppy job here in washington has profound effects on the performance of the real economy and, you know, hopefully, i mean, i must say i look at some of the discussion around the debt ceiling discussion, around the debt ceiling extension, and i share lou's view that, you know, this is really the height of irresponsibility that we're sitting here discussing whether the united states should default or not on its debt which is debt that has been incurred as a result of spending that has been approved by both bodies of congress and signed by the president of the united states, and i mean, there's 535 members
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of congress. i awe sure you that not a -- i assure you that not a single one of them if confronted with a credit card bill that they didn't like would simply say i'm not going to pay that because they know that the implications for their credit rating, the access to future bank loans would be affected for 10, 15, 20 year, and so it's appalling we're sitting here discussing whether we would do that with, you know, this country that we're all so incredibly proud of so -- >> let me, the last question, try to be a little bit provocative here. folks like allen blinder, very well-republic -- well-respected economist, peter diamond, and blanking the "new york times" economist,
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influenced from the left, but influential. they say you're just seeing the problem wrong. we have to get the economy growing again. if we have demand, we have growth, we need to do something about the infrastructure, have -- spend more on infrastructure, all this worry about the deficit for the next two or three years is a mistake, and business would respond if we could get that going again. what do you say in response to that? >> well, i'd say like many things that i don't completely agree with, there's a kernel of truth to that. >> that's interesting. >> i think the answer here is that, you know, i've said it a number of times that i think what we need are the three b's. it needs to be big which means $4 trillion or more. it needs to be balanced which i think the consensus is that $1.2 trillion of revenues and 2.8 to
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$3 trillion of expense reduction, and the third thing is back end loaded which is sensitive to the fact that we're still performing well below potential, and that we need to make some investments to stimulate our competitiveness. i mean, it's embarrassing in a country that we're, you know, somewhere in the 20s in educational achievements. it's embarrassing, you know, the degree to which -- i mean, you go to many other countries that we used to think of as developing countries, and their infrastructure and, you know, roads and, you know, train systems are better than ours so that's the kernel of truth, but there is no road to a competitive, successful united states 10, 15, 20, 30 years from now that does not strongly address the deficit issue that we have. >> thanks.
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i've short changed the audience a little bit, but i'll remedy that a bit by taking one or two questions from the audience. we'll take a mic there. identify yourself, please. >> i'm ron williams, retired chairman and ceo of aetna. a couple comments and questions. in business, strategy follows your budget, and i'd be interested in your comments around getting the strategy right and then getting the budget. the sec question is really -- the second question is really a question about alignment. the question is is there any combination of structures that make it so, if you don't have a budget, and we don't have a proved deficit level, we don't pay congress or the president. it's pay for performance. [laughter] i'd be interested in your comments on that. >> anyone like to tackle that?
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that's an intriguing thought. any comments? >> i'll jump in on the first one because it's so important which is when you think about what we need to do, and we know, we use $4 trillion as short hand. we know we need a deal around $4 trillion to stabilize the debt and put it on a downward path, and that's really hard to do, but it's not sufficient to fix the problem. you heard that through the whole panel and policy peek talk about it's not enough to get the fiscal situation under control, but you need the right budgetary policies. what's kind of astounding in the country, starting with the fact that we don't have a budget; right? the way the federal budget operates without putting a budget in place is beyond any of us, but the fact that we also don't use it as the opportunity to pick our national priorities. that are the who's important things for the country to do? what are the best ways to do them? should government do them? should it be at the federal
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level? state level? i we want to public policy school, and these are the things you do, get out of school, and you realize this is is not how dough do it at all. there's not an exercise of national priority, figuring out how to do them, and figuring out thaw dlsh they are important enough to do, you pay for them. you need long term growth and competitiveness among other values that are leading them, and then you need to pay for them because it's absolutely unacceptable to, one, fix spending policies that don't even achieve those goals, and, two, then hand that bill to your kidsment i explain to my kids that's what we're doing to make what i do interesting unsuccessfully, but you can't explain it in any way that makes it acceptable. just quickly to the second point, it's a gimmick, but it feels like a moment where we need the gimmick. we have such frustration, particularly, those of you who run companies, have such frustration that we hired a group of people to come to
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washington, and the amount of energy that goes on two teams beating each other up instead of solving a problem that no matter how much we disagree on the role of government or perfect way to solve it, we all know has to be solved just seems completely unacceptable. there's those moments where you need the no budget, no pay or the other kind of gimmicks that's nothing else other than to focus attention that we have to work on it until we get it done. >> i like it. lower the base pay, get a bonus that depends on performance. that's attractive. yes? >> i'm garret mitchell, and i write the mitchell report, and i want to follow on that with another thought. ralph, i think, captured it saying great country, bad management, ie, bad government. it seems to me if there's any lesson from this panel and other discussions is there is a way to
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fix the balance sheet. it's not clear that there's a way to fix governance. in the first panel, mayor fisher talked about moving at the speed of business. this is a question for mr. mcdonald. in an earlier life, i competed directly against your company in the advertising business in a cat goir that at that time we were pretty successful at which was the mouthwash business, but what i learned about proctor among many others is that marketing plans were three pages long, and it occurred to me that if the arguably the largest consumer company can direct product managers to put their annual market plans in three pages, that we might be able to take some of that magic and instead of having a 2,000-some
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odd page health care bill or other bills of that length, that nobody reads, that there's another place where the business community might be able to have some influence on this third problem that mr. schlosstein talked about which is bad governance. >> that's an interesting point. we spend a lot of time training our new hires in thinking up front so that they can distill their thinking to those one page, two page, or three page memos. i'm entreesed in asking mr. ya about what she learned in school in creating policy because i almost think there's some pride taken in the longer the -- and the more complex, the better. i don't know. the longer, the more complex, the less prince. s. if you deal with principle, it
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can be shorter, and you don't have to think about every executional detail, and i think what we missed because ron -- as ron suggested, we don't have a strategy and the budget is not following the strategy. we deal with execution rather than principle. i agree with your point very much. ..
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>> both the first treasury secretary and the nominee to be the second, both of whom who have essentially spent -- with brief interruptions -- their entire career in public service and match up with the best public servants i think you find anywhere in the world in their field. and i would say the same thing about the current deputy secretary of state, bill burns, is completing 30er years in public service -- 30 years in public service and is one when i think of only a couple career foreign service officers to rise to the rank of deputy secretary. but we need to put more energy
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and resources into the development of those public sector careers. i think the other point which is more troubling, and there has been a lot of of commentary on this recently, we have to recognize that there have been changes in our political demographics partly as a result of redistricting, partly as a result of changes in the country that have pushed more of our elected legislate or to haves -- legislators to the extreme end, more concerned about the challenge coming to them because more and more districts are essentially single-party districts. so the political threat to an incumbent comes on their right flank or their left flank depending on the party. and that creates a foundation for the kind of intense partisanship and division that we see.
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technology, money in politics, the transportation availability, all of that adds to it. my first job after graduate school was on a senate staff and then on a presidential campaign that came out of it in 1967-'68. and the first thing -- it was for robert kennedy. and the first thing that senator kennedy said to me on the first day i started in may of 1967 as the most junior member of the legislative staff was, and he was hardly someone who had grown up in the senate or was devoted to its internal process, but the first thing he said to me was he was going to set up a series of meetings with some people with whom he disagreed about a lot of subjects but who knew and loved the senate and its process. and so for that first be couple of weeks i got to spend time on the democratic side with senator
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long and senator russell, and on the republican side with senator dirksen and case and javits. i think that kind of thing, that kind of experience doesn't happen very much anymore. and it's one anecdotal indication of the change. somehow we need more people, more thoughtful forums where those kind of issues that affect our political process are discussed as well as the substantive issues that we've been discussing today. >> yes. at the back there, let's have one question from the back, and then we'll have to wind it up. >> thank you. my name is paulette lee, i'm a communications and marketing consultant. and the name of this panel is "deficit reform: resolving uncertainty and promoting innovation." and i've heard a lot of discussion of resolving
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uncertainty vis-a-vis what the government's responsibility is, what congress should be doing, what the president should be doing. but i haven't heard very much about what, um, business should be doing in terms of innovation. and so i would present that question to the panelists. thank you. >> well, i'm not sure that's right. i think the panelists have commented on that, but -- so let me go and make in the final words from the panelists. we'll start at the far end. >> let bob go first, because he runs a much bigger company. [laughter] >> i tried to talk about that, but i couldn't agree with you or or -- with you more that innovation is in many ways the solution to many of our problems. there was a wonderful book written by a man named matt ridty called the rational optimist, and matt is british. in the book he talks about
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innovation really solving the majority of the world's problems, what has gotten us here today. and he reminds us that back in the mid 1800s those people who lived in the u.k. at the time thought that we were all going to die under heaps of horse manure because of the number of horses we all needed. and, of course, that didn't happen because of the invention of the automobile. and the invention of the automobile's brought other problems. but i do think innovation the solution. and it's why we spend so much money trying to improve people's lives through innovation. the way to get that done is by having the best schools, by having competitive schools. we've got to have competitive education. most of our international partners are educated in the united states. some of them would like to stay here, but unfortunately when they graduate, they can't get the visas to stay, and they have to to back. so education and the
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infrastructure is certainly one thing, and i'll stop so the other panelists can comment. >> yeah, i couldn't agree more with what bob said and the gist of your question. at the end of the day, you know, as i said a hitting earlier -- a little earlier, for america to achieve what it is capable of achieving from an economic point of view, it's fundamentally dependent upon our ability to continue to innovate and to create and to invent. and i think what -- we want a governmental system, i believe, and i don't mean this as business, i mean we should all want that, that effectively allows business to do that because, ultimately, that's how we will create more jobs and more economic output here in the united states, but that does that in a way that's respectful of the populist, populists as a whole. so we do need the environmental
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protections, we do need the safety protections, we do need the licensing approval of drugs because, you know, none of us individually are capable of, you know, ascertaining the safety and soundness of those individual products. but having said that, we win as a country if we are using government to play the role as a protecter of those things where expertise is required but that we then allow a more unfettered investment in our people and in our innovations to win. i mean, if you look at the industries where the united states is winning globally, they are almost all industries where, you know, technological or, you know, sensitivity to consumers deeply researched consumer needs, i would say our financial
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industry is an industry where, you know, we are winning globally. i agree generally with lew's comments about the regulatory environment, but i think we have to look at that also to make sure that we're not rendering an industry that we're winning in around the world today to be less competitive. >> maya, any last comments? >> sure. so i was sort of thinking about all the questions that came up and the comparisons about business and public sector and what either could be learning from the other, and i was thinking about in the public sector how we just don't -- back to your first point, we just don't start with sort of what your objective is. these or were all things you would do if you were rubbing a business -- running a business, but what your objective is, building an operation that works to achieve it. if you look at how government is organized, it doesn't make sense in so many ways. it's completely compartmentalized on so many issues where we need to be problem solving. so the operations that you use
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to achievement and those goals and then -- achievement achieves and the evaluation piece and using that and funneling back into changing things or redirecting our resources. but you don't want to overstate the comparison, right? because there's a bottom line in business, and there's not the similar bottom line in government. and it's not as though you can run public policy in the exact same way, and these are public interest things, nonrival, nondivisible. they're things that the private sector can't do in so many ways. there are so many useful questions about how we can improve government, but you also don't want to overstate them. but i was also thinking about the fact that this innovation problem is so true in government as well. and i think the same broken system in government that is keeping us from solving problems that we know are there -- and i always come back seeing partisanship as a big part of this problem, the fact that the two sides would rather beat each other up rather than come up with answers -- there are public
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sector problems which we need to solve. and if we were able to find a way to be more entrepreneurial and innovative in government which, again, is a lot of what you do in a think tank, but to actually have that work in our political system and have more partnerships with the private sector in solving this problem, this country would be moving so much farther and so much faster. this fiscal problem just seems to me like it's gumming up the wheels of everything and that there's absolutely no reason it's not okay to disagree on what the priorities are or how pest to get them. but if we are breaking our system that allows government to financially function at all, we will not get to any of those discussions. and shame on us if we end up not being poised where we are for such a tremendous next couple of decades, and we choose not to make the choices that allow us to go forward with these. >> lew? last words? >> well, i think the point about the value of investing in innovation, and i would add talent and talent management to
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that, nothing is, nothing is more important. procter & gamble, obviously, is one of the leaders in the global business community because of the priority of bob and his predecessors have attached to that. at citi coming directly out of the financial crisis we established innovation centers patterned after the kind of -- [inaudible] lab that some technology companies have, one in palo alto and one in singapore. although it's only three or four years, we're already seeing an extraordinary value in that. and the other, i think, lesson of the time i've spent in and around the business world is that every investment you make in talent at every level of the talent chain, every aspect of talent management is about the
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best thing you could do with that amount of resources. >> thank you. you made a great segway, really, that gets us to our last panel which is you talked a little bit about innovation in government and improving government performance, and that's exactly what we're going to talking about with daryl's leadership after lunch. and so we'll look forward to that panel. i'm certainly a big believer you can get productivity gains and efficiency gains in government. this has been a terrific panel. my thanks to everybody on the panel and the audience for coming. [applause] and we'll see you later. [inaudible conversations]
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[inaudible conversations] [inaudible conversations]

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